Joyner Company's income statement for Year 2 follows: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of equipment Income before taxes Income taxes Net income Assets Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Its balance sheet amounts at the end of Years 1 and 2 are as follows: Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 915,000 503,250 411,750 330,000 81,750 10,000 91,750 27,525 $ 64,225 Required: For Year 2: Year 2 $ 23,175 203,000 288,000 7,500 521,675 511,000 127,750 383,250 39,000 $943,925 $ 305,000 17,000 42,000 364,000 181,000 545,000 285,000 113,925 398,925 $ 943,925 Year 1 $ 17,900 128,000 261,000 15,000 421,900 413,000 123,900 289, 100 0 $ 711,000 $ 245,000 32,000 40,000 317,000 68,000 385,000 245,000 81,000 326,000 $ 711,000 Equipment costing $36,000 with accumulated depreciation of $31,000 was sold during Year 2 for $15,000. The company paid a cash dividend during Year 2 but did not retire any bonds or repurchase any of its own stock. 1. Determine the net cash provided by (used in) operating activities using the indirect method. 2. Prepare a statement of cash flows. 3. Compute the free cash flow.
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.
Step by step
Solved in 3 steps with 2 images
