Below is the balance sheet and income statement of Avett, Ine. CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME STATEMENT (in millions) Year Ending (in millions) Dec. 31 December 31, 2020 2020 2019 $20,000 Revenues (10,000) (10,000) (8,000) 2,000 (500) $1,500 Cost of Goods Sold ASSETS Profit Margin Cash and Cash Equivalents S1,000 S800 SG&A Accounts Receivable 300 500 Pre-Tax Income Merchandise Inventory 880 650 Тах Expense Net Income Short Term Investments 145 120 TOTAL CURRENT ASSETS 2,325 2,070 PP&E, net accumulated depreciation of $600 in 2020 and $500 in 2019 TOTAL ASSETS 1,250 1,000 Additional Information -------------- $3,575 $3,070 > No Property, Plant & Equipment (PPE) was sold during 2020. > No short-term investments were sold during the year. > All depreciation expense is included in SG&A > Because there is no dividends payable account at either the start of end of the year, you may assume all dividends declared in 2020 were paid in 2020. LIABILITIES Accounts Payable Other Payables TOTAL CURRENT LIABILITIES $530 $500 410 362 940 862 ------------------------------------- Mortgage Payable Long-Term Bank Loan 700 900 850 To Do TOTAL LIABILITIES 1,840 2,412 > Complete the 2020 Cash Flow Statement on the following page. OWNERS EQUITY Note: You may use the worksheet provided on the last page to help you prepare the Cash Flow Statement. Common Stock 80 70 Preferred Stock Additional Paid in Capital Retained Earnings Hint #1 PPE: Remember to evaluate changes in gross PPE separate from changes in accumulated depreciation. Recall gross PPE less accumulated depreciation equals net PPE. 290 250 1,365 1,735 338 Hint #2 Stock Issuance: Remember the total change in cash due to stock issuances/repurchases is the sum of the change in common stock (stated par value) and additional paid in capital (APIC). TOTAL OWNERS EQUITY 658 TOTAL LIABILITIES + OWNERS EQUITY $3,575 $3,070
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Statement of cash flows is one of the financial statement which shows all cash inflows and cash outflows related with the operations of the business. It can be prepared by direct method or by indirect method.
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