Combining the information provided by various ratios can enhance your understanding of the financial condition of a business. Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided. Na Pali Coast CompanyComparative Income StatementFor Years Ended December 31, 20-2 and 20-1 20-2 20-1 Net sales $466,451 $291,613 Cost of goods sold 285,889 188,626 Gross profit $180,562 $102,987 Operating expenses 125,650 78,200 Operating income $54,912 $24,787 Other expenses 1,200 500 Income before income taxes $53,712 $24,287 Income tax expense 18,250 7,285 Net income $ 35,462 $17,002 Na Pali Coast CompanyComparative Balance SheetDecember 31, 20-2 and 20-1 20-2 20-1 Assets Current assets: Cash $8,600 $7,500 Government notes 3,000 2,000 Accounts receivable (net) 10,500 8,600 Merchandise inventory 53,600 33,200 Supplies and prepayments 4,500 3,200 Total current assets $80,200 $54,500 Property, plant, and equipment: Land $40,000 $40,000 Building (net) 200,000 150,000 Delivery equipment (net) 13,000 15,000 Office equipment (net) 5,400 6,000 Patents 5,000 6,000 Total property, plant, and equipment $263,400 $217,000 Total assets $343,600 $271,500 Liabilities Current liabilities: Notes payable $5,000 $3,000 Accounts payable 28,700 22,300 Accrued and withheld payroll taxes 4,200 5,600 Accrued interest payable 500 1,700 Total current liabilities $ 38,400 $32,600 Long-term liabilities: Bonds payable 50,000 20,000 Total liabilities $88,400 $52,600 Stockholders' Equity Common stock ($5 par) $115,000 $100,000 Paid-in capital in excess of par 65,000 60,000 Retained earnings 75,200 58,900 Total stockholders' equity $255,200 $218,900 Total liabilities and stockholders' equity $343,600 $271,500 Required: 1. Compute the average number of days required to sell inventory and collect cash from customers buying on account. Round your answers to two decimal places._______________days. 2. Note that Na Pali Coast Company also buys inventory on account. On average, how many days pass before Na Pali pays its creditors? Round your answer to two decimal places._____________ days. 3. Using the information from your answers to parts (1) and (2), compute the number of days from the time Na Pali Coast pays for inventory until it receives cash from customers on account. Round your answer to two decimal places.________ days I really need help with this problem I have been working on it for 10 days now.
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.
Combining the information provided by various ratios can enhance your understanding of the financial condition of a business.
Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided.
| Na Pali Coast Company Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 |
||
|---|---|---|
| 20-2 | 20-1 | |
| Net sales | $466,451 | $291,613 |
| Cost of goods sold | 285,889 | 188,626 |
| Gross profit | $180,562 | $102,987 |
| Operating expenses | 125,650 | 78,200 |
| Operating income | $54,912 | $24,787 |
| Other expenses | 1,200 | 500 |
| Income before income taxes | $53,712 | $24,287 |
| Income tax expense | 18,250 | 7,285 |
| Net income | $ 35,462 | $17,002 |
| Na Pali Coast Company Comparative Balance Sheet December 31, 20-2 and 20-1 |
||
|---|---|---|
| 20-2 | 20-1 | |
| Assets | ||
| Current assets: | ||
| Cash | $8,600 | $7,500 |
| Government notes | 3,000 | 2,000 |
| |
10,500 | 8,600 |
| Merchandise inventory | 53,600 | 33,200 |
| Supplies and prepayments | 4,500 | 3,200 |
| Total current assets | $80,200 | $54,500 |
| Property, plant, and equipment: | ||
| Land | $40,000 | $40,000 |
| Building (net) | 200,000 | 150,000 |
| Delivery equipment (net) | 13,000 | 15,000 |
| Office equipment (net) | 5,400 | 6,000 |
| Patents | 5,000 | 6,000 |
| Total property, plant, and equipment | $263,400 | $217,000 |
| Total assets | $343,600 | $271,500 |
| Liabilities | ||
| Current liabilities: | ||
| Notes payable | $5,000 | $3,000 |
| Accounts payable | 28,700 | 22,300 |
| Accrued and withheld payroll taxes | 4,200 | 5,600 |
| Accrued interest payable | 500 | 1,700 |
| Total current liabilities | $ 38,400 | $32,600 |
| Long-term liabilities: | ||
| Bonds payable | 50,000 | 20,000 |
| Total liabilities | $88,400 | $52,600 |
| Common stock ($5 par) | $115,000 | $100,000 |
| Paid-in capital in excess of par | 65,000 | 60,000 |
| 75,200 | 58,900 | |
| Total stockholders' equity | $255,200 | $218,900 |
| Total liabilities and stockholders' equity | $343,600 | $271,500 |
Required:
1. Compute the average number of days required to sell inventory and collect cash from customers buying on account. Round your answers to two decimal places._______________days.
2. Note that Na Pali Coast Company also buys inventory on account. On average, how many days pass before Na Pali pays its creditors? Round your answer to two decimal places._____________ days.
3. Using the information from your answers to parts (1) and (2), compute the number of days from the time Na Pali Coast pays for inventory until it receives cash from customers on account. Round your answer to two decimal places.________ days
I really need help with this problem I have been working on it for 10 days now.
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