GOLDEN CORPORATION Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Income before taxes Income taxes expense Net income Cash flows from operating activities Additional Information on Current Year Transactions a. Purchased equipment for $47,800 cash. b. Issued 12,700 shares of common stock for $5 cash per share. c. Declared and paid $96,000 in cash dividends. Required: Prepare a complete statement of cash flows using the indirect method for the current year. Note: Amounts to be deducted should be indicated with a minus sign. GOLDEN CORPORATION Statement of Cash Flows For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operations: Cash flows from operating activities GOLDEN CORPORATION Statement of Cash Flows For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Changes in current assets and current liabilities Cash flows from investing activities $ 1,827,000 1,093,000 734,000 501,000 54,000 Cash flows from financing activities: 179,000 31,800 $ 147,200
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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Golden Corporation's current year income statement, comparative balance sheets, and additional information follow. For
the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all
purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) any
change in Income Taxes Payable reflects the accrual and cash payment of taxes.
Assets
Cash
Accounts receivable.
Inventory
Total current assets
GOLDEN CORPORATION
Comparative Balance Sheets
December 31
Equipment
Accumulated depreciation-Equipment
Total assets
Liabilities and Equity
Accounts payable
Income taxes payable
Total current liabilities
Equity
Common stock, $2 par value
Paid-in capital in excess of par value, common stock
Retained earnings
Total liabilities and equity
GOLDEN CORPORATION
Current Year
$ 171,000
93,500
611,500
876,000
353,800
(161,500)
$ 1,068,300
$ 101,000
35,000
136,000
600,400
208,600
123,300
$ 1,068,300
Prior Year
$ 114,700
78,000
533,000
725,700
306,000
(107,500)
$ 924,200
$ 78,000
28,600
106,600
575,000
170,500
72,100
$ 924,200](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ce123d7-ec28-4713-8995-d1c19687ec94%2F0aba8771-18fe-4c49-9918-2d5bfe79e746%2Fzwsx2dk_processed.jpeg&w=3840&q=75)
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