From the following information prepare a statement of cash flows on the indirect method for Wishful Thinking College, a not-for-profit college, for the year ended 12/31/21. Make sure you include all required disclosures. · Increase in net assets $1,000,000 · Increase in cash 855,000 · Increase in Investment Income Receivable 8,000 · Increase in student receivables 32,000 · Decrease in supplies inventory 5,000 · Increase in accounts payable 100,000 · Decrease in deferred tuition revenue 20,000
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.
From the following information prepare a statement of
· Increase in net assets $1,000,000
· Increase in cash 855,000
· Increase in Investment Income Receivable 8,000
· Increase in student receivables 32,000
· Decrease in supplies inventory 5,000
· Increase in accounts payable 100,000
· Decrease in deferred tuition revenue 20,000
Included in the change in net assets were the following items:
· Cash gifts for scholarships $100,000
· Cash gifts for equipment acquisition 10,000
· Cash gifts for permanent endowment 500,000
· Gift of land 300,000
· Reclassifications of temporarily restricted amounts 80,000
· Donated services of retired professor teaching
2 online classes per term valued at 25,000
The controller provided analyses of the following accounts:
Property, Plant, and Equipment 1/1/21 $5,000,000
- Disposals of equipment (110,000)
- (Sold for $93,000)
- Gift of land 300,000
- Construction costs paid to XYZ Construction
for new building (used proceeds of a $400,000
unsecured L.T. Note and other cash on hand) 500,000
Depreciation expense (175,000)
Property, Plant, and Equipment 12/31/21 $5,515,000
Investments 1/1/21 $1,000,000
Purchases 125,000
Sale of investments (sold for $110,000) (150,000)
Unrealized gain to adjust to FMV 100,000
Investments 12/31/21 $1,075,000
example
| Statement of Activities | |||
| For year ended December 31, 20XX | |||
| Temporarily | Permanently | ||
| Unrestricted | Restricted | Restricted | Total |
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