Novak Inc., a retailer of garden tools that follows ASPE, had the following statements prepared as of December 31, 2023 Cash Accounts receivable Inventory Prepaid rent Equipment Accumulated depreciation-equipment Total assets Accounts payable Income tax payable NOVAK Inc. Comparative Statement of Financial Position December 31 Sales revenue Cost of goods sold Gross margin Operating expenses Operating income Interest expense Gain on disposal of equipment Income before income tax Net income Income tax expense 1. Additional information: 2. 3. 2023 Long-term loans payable Common shares Retained earnings Total liabilities and shareholders' equity $297,080 $71,380 57,400 $11,200 (2,100) 41,800 5,500 154,000 (33,000) $297,080 NOVAK Inc. Income Statement Year Ended December 31, 2023 $50,000 4,200 60,000 126,000 56,880 $370,000 197,000 173,000 117,400 55,600 9,100 46,500 22,320 $24,180 2022 $53,900 50,800 74,000 4,100 126,000 (22,100) $286,700 $38,500 6,400 69,500 127,200 45,100 $286,700 Dividends on common shares in the amount of $12,400 were declared and paid during 2023. Depreciation expense of $24,900 is included in operating expenses. Equipment with a cost of $20,000 that was 70% depreciated was sold during 2023.
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.
pls answer the following question
Step by step
Solved in 2 steps with 2 images
