Exercise 23-17 Cullumber Inc., had the following condensed balance sheet at the end of operations for 2019. CULLUMBER INC. BALANCE SHEET DECEMBER 31, 2019 Cash $8,600 Current liabilities $15,000 Long-term notes payable Bonds payable Current assets other than cash 28,900 25,500 20,200 Equity invesments Plant assets (net) Land 25.000 67,300 Common stock 75,000 40,400 Retained earnings 24,900 $165,400 $165,400 During 2020, the following occurred. 1. A tract of land was purchased for $9,100. 2. Bonds payable in the amount of $15,000 were redeemed at par. 3. An additional $10,100 in common stock was issued at par. 4. Dividends totaling $9,500 were paid to stockholders. 5. Net income was $30,600 after allowing depreciation of $13,700. 6. Land was purchased through the issuance of $22,400 in bonds. 7. Cullumber Inc. sold part of its investment portfolio for $12,800. This transaction resulted in a gain of $2,000 for the company. No unrealized gains or losses were recorded on these investments in 2020. 8. Both current assets (other than cash) and current liabilities remained at the same amount. Prepare a statement of cash flows for 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
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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