es [The following information applies to the questions displayed below.] Green Brands, Incorporated (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI's Year 2 and Year 1 year-end balance sheets: Account Title Accounts receivable Merchandise inventory Prepaid insurance Accounts payable Salaries payable Unearned service revenue The Year 2 income statement is shown next: Sales Cost of goods sold Gross margin Service revenue Insurance expense Salaries expense Income Statement Depreciation expense Operating income Gain on sale of equipment Net income Year 2 $ 21,500 56,700 15,000 26,300 4,950 850 GREEN BRANDS, INCORPORATED Statement of Cash Flows (Operating Activities) For the Year Ended December 31, Year 2 Cash flows from operating activities: Cash collections from customers for sales Cash collections from customers for services Cash payments for: Net cash flow from operating activities Year 1 $ 26,300 49,900 26,400 18,900 $ 607,000 Required a. Prepare the operating activities section of the statement of cash flows using the direct method for Year 2. Note: Amounts to be deducted should be indicated with a minus sign. 3,850 2,850 (375,000) 232,000 4,300 (39,000 (149,000) (5,300) 43,000 4,900 $ 47,900
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.
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[The following information applies to the questions displayed below.]
Green Brands, Incorporated (GBI) presents its statement of cash flows using the indirect method. The following accounts
and corresponding balances were drawn from GBI's Year 2 and Year 1 year-end balance sheets:
Account Title
Accounts receivable
Merchandise inventory
Prepaid insurance
Accounts payable
Salaries payable
Unearned service revenue
The Year 2 income statement is shown next:
Sales
Cost of goods sold
Gross margin
Service revenue
Insurance expense
Salaries expense
Income Statement
Depreciation expense
Operating income
Gain on sale of equipment
Net income
Year 2
$ 21,500
56,700
15,000
26,300
4,950
850
GREEN BRANDS, INCORPORATED
Statement of Cash Flows (Operating Activities)
For the Year Ended December 31, Year 2
Cash flows from operating activities:
Cash collections from customers for sales
Cash collections from customers for services
Cash payments for:
Net cash flow from operating activities
Year 1
$ 26,300
49,900
26,400
18,900
$ 607,000
Required
a. Prepare the operating activities section of the statement of cash flows using the direct method for Year 2.
Note: Amounts to be deducted should be indicated with a minus sign.
3,850
2,850
(375,000)
232,000
4,300
(39,000
(149,000)
(5,300)
43,000
4,900
$ 47,900](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F32240f2f-ae11-44dd-b43c-8bc9b339ee86%2F45c0d56a-14b0-4573-953d-7c2d2066078c%2Fzipnst9_processed.png&w=3840&q=75)
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