Financial information for a company for 2013 is provided. The company has a December 31 year- end. Increase in accounts receivable 800 Decrease in prepaid expenses 1400 Decrease in accounts payable 2100 Purchase of new recording equipment 5000 Dividend declared 1550 Cash from sale of building 500 Issued shares to the public 1200 Purchased 10% of Beats 1000 Repaid bank loan 2200 Increased unearned revenue 4000 Short-term line-of-credit (fluctuates positive or negative) -4000 Revenues 150,000 Cost of Goods Sold 90,000 SG&A 35,000 Amortization expense (intangibles) 8,000 Depreciation expense (PP&E) 6,000 Gain on sale of building 500 Net income 11,500 1.) Prepare the Income Statement for 2013 and prepare the entire Cash Flow Statement for 2013 using the indirect method for the operating activities section. Assume a beginning cash balance of $25,000.
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.
Financial information for a company for 2013 is provided. The company has a December 31 year- end.
| Increase in |
800 |
| Decrease in prepaid expenses | 1400 |
| Decrease in accounts payable | 2100 |
| Purchase of new recording equipment | 5000 |
| Dividend declared | 1550 |
| Cash from sale of building | 500 |
| Issued shares to the public | 1200 |
| Purchased 10% of Beats | 1000 |
| Repaid bank loan | 2200 |
| Increased unearned revenue | 4000 |
| Short-term line-of-credit (fluctuates positive or negative) | -4000 |
| Revenues | 150,000 |
| Cost of Goods Sold | 90,000 |
| SG&A | 35,000 |
| Amortization expense (intangibles) | 8,000 |
| 6,000 | |
| Gain on sale of building | 500 |
| Net income | 11,500 |
1.) Prepare the Income Statement for 2013 and prepare the entire
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