Financial information for Jay Co. is provided below: BALANCE SHEETS 12/31/20 12/31/19 Cash ANSWER/ALL OF THEM $408,000 $ 192,000 Accounts receivable O 360,000 216,000 Inventory O 384,000 480,000 Equipment I $608,000 $960,000 Less accumulated depreciation O/I (320,000) 288,000 (304,000) 656,000 $1,440,000 $1,544,000 Accounts payable O $ 176,000 $ 96,000 Income taxes payable O 352,000 392,000 Bonds payable F 370,000 600,000 Common stock F 216,000 216,000 Retained earnings O/F 326,000 240,000 $1,440,000 $1,544,000 INCOME STATEMENT For the Year Ended December 31, 2020 Sales revenue $8,448,000 Cost of sales 7,152,000 Gross profit 1,296,000 Selling expenses $600,000 Administrative expenses 217,000 817,000 Income from operations 479,000 Gain on sale of equipment 5,000 Interest expense (100,000) Income before taxes 384,000 Income taxes 96,000 Net income $ 288,000 The following additional data were provided: Cash dividends were paid during 2020. During the year, equipment was sold for $290,000. This equipment cost $352,000 and had a book value of $285,000 at the time of sale. Depreciation expense is included in the administrative expenses. Instructions: Prepare the entire statement of cash flows for Jay Company, using the indirect and direct methods (for the operating activities).
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 Jay Co. is provided below:
12/31/20 12/31/19
Cash ANSWER/ALL OF THEM $408,000 $ 192,000
Inventory O 384,000 480,000
Equipment I $608,000 $960,000
Less
$1,440,000 $1,544,000
Accounts payable O $ 176,000 $ 96,000
Income taxes payable O 352,000 392,000
Bonds payable F 370,000 600,000
Common stock F 216,000 216,000
$1,440,000 $1,544,000
INCOME STATEMENT
For the Year Ended December 31, 2020
Sales revenue $8,448,000
Cost of sales 7,152,000
Gross profit 1,296,000
Selling expenses $600,000
Administrative expenses 217,000 817,000
Income from operations 479,000
Gain on sale of equipment 5,000
Interest expense (100,000)
Income before taxes 384,000
Income taxes 96,000
Net income $ 288,000
The following additional data were provided:
- Cash dividends were paid during 2020.
- During the year, equipment was sold for $290,000. This equipment cost $352,000 and had a book value of $285,000 at the time of sale.
- Depreciation expense is included in the administrative expenses.
Instructions:
Prepare the entire statement of
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