Consider the following balance sheets and income statement for Cruyff Enterprises. Cruyff paid $25,000 for rent in 2020. Compute the cash that Cruyff paid for dividends. Cruyff Enterprises Balance Sheets As of December 31, 2020 and 2019 2020 2019 Assets: Cash $18,650 $ 14,900 Accounts Receivable 42,000 36,000 Inventory 60,500 50,000 Prepaid Rent 3,000 1,400 Property, Plant and Equipment 230,000 205,600 Less: Accumulated Depreciation (75,000) (65,000) Total Assets $279,150 $242,900 Liabilities and Stockholders’ Equity: Accounts Payable $26,500 $21,000 Interest Payable 650 400 Unearned Revenue 7,000 10,000 Bonds Payable 37,000 37,000 Common Stock 20,000 15,000 Additional Paid-In Capital 48,000 40,000 Retained Earnings 140,000 119,500 Total Liabilities and Stockholders’ Equity: $279,150 $242,900 Cruyff Enterprises Income Statement For the year ended December 31, 2020. Sales Revenue $ 470,000 Cost of Goods Sold 315,000 Wage Expense 71,000 Rent Expense xx,xxx Depreciation Expense 15,000 Interest Expense 19,000 Net Income yy,yyy
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.
Consider the following
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Cruyff Enterprises Balance Sheets As of December 31, 2020 and 2019 |
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2020 |
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2019 |
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Assets: |
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Cash |
$18,650 |
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$ 14,900 |
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|
42,000 |
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36,000 |
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Inventory |
60,500 |
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50,000 |
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Prepaid Rent |
3,000 |
|
1,400 |
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Property, Plant and Equipment |
230,000 |
|
205,600 |
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Less: |
(75,000) |
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(65,000) |
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Total Assets |
$279,150 |
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$242,900 |
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Liabilities and |
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Accounts Payable |
$26,500 |
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$21,000 |
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Interest Payable |
650 |
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400 |
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Unearned Revenue |
7,000 |
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10,000 |
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Bonds Payable |
37,000 |
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37,000 |
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Common Stock |
20,000 |
|
15,000 |
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Additional Paid-In Capital |
48,000 |
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40,000 |
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|
140,000 |
|
119,500 |
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Total Liabilities and Stockholders’ Equity: |
$279,150 |
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$242,900 |
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Cruyff Enterprises Income Statement For the year ended December 31, 2020. |
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Sales Revenue |
$ 470,000 |
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Cost of Goods Sold |
315,000 |
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Wage Expense |
71,000 |
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Rent Expense |
xx,xxx |
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Depreciation Expense |
15,000 |
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Interest Expense |
19,000 |
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Net Income |
yy,yyy |
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