Financial statements of ABC Mining Co. for 2019 and 2018 are provided below. STATEMENT OF FINANCIAL POSITION 12/31/19 12/31/18 Property, plant and equipment €304,000 €480,000 Less accumulated depreciation (160,000) 144,000 (152,000) 328,000 Inventory 192,000 240,000 Accounts receivable 180,000 108,000 Cash 204,000 96,000 €720,000 €772,000 Share capital-ordinary €108,000 €108,000 Retained earnings 168,000 120,000 Bonds payable 180,000 300,000 Income taxes payable 176,000 196,000 Accounts payable 88,000 48,000 €720,000 €772,000 INCOME STATEMENT For the Year Ended December 31, 2019 Sales €4,200,00 Cost of sales 3,576,000 Gross profit 624,000 Selling expenses €300,000 Administrative expenses 96,000 396,000 Income from operations 228,000 Interest expense 36,000 Income before taxes 192,000 Income taxes 48,000 Net income € 144,000 The following additional data were provided: Dividends for the year 2019 were €96,000. During the year, equipment was sold for €120,000. This equipment cost €176,000 originally and had a book value of €144,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales. All depreciation expense is in the selling expense category. Calculate the net cash provided by operating activities using indirect method
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 statements of ABC Mining Co. for 2019 and 2018 are provided below.
STATEMENT OF FINANCIAL POSITION
12/31/19 12/31/18
Property, plant and equipment €304,000 €480,000
Less
Inventory 192,000 240,000
Cash 204,000 96,000
€720,000 €772,000
Share capital-ordinary €108,000 €108,000
Bonds payable 180,000 300,000
Income taxes payable 176,000 196,000
Accounts payable 88,000 48,000
€720,000 €772,000
INCOME STATEMENT
For the Year Ended December 31, 2019
Sales €4,200,00
Cost of sales 3,576,000
Gross profit 624,000
Selling expenses €300,000
Administrative expenses 96,000 396,000
Income from operations 228,000
Interest expense 36,000
Income before taxes 192,000
Income taxes 48,000
Net income € 144,000
The following additional data were provided:
- Dividends for the year 2019 were €96,000.
- During the year, equipment was sold for €120,000. This equipment cost €176,000 originally and had a book value of €144,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
- All depreciation expense is in the selling expense category.
Calculate the net cash provided by operating activities using indirect method
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