omparative balance sheet accounts of Riverbed Company are presented below. RIVERBED COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2020 2019 Cash $69,300 $51,100 Accounts Receivable 154,900 130,000 Inventory 75,600 60,700 Debt investments (available-for-sale) 54,500 85,100 Equipment 70,600 48,100 Buildings 146,000 146,000 Land 40,200 24,700 Totals $611,100 $545,700 Credit Balances Allowance for Doubtful Accounts $10,100 $7,900 Accumulated Depreciation—Equipment 20,900 13,900 Accumulated Depreciation—Buildings 37,300 28,200 Accounts Payable 66,100 60,600 Income Taxes Payable 12,100 10,000 Long-Term Notes Payable 62,000 70,000 Common Stock 310,000 260,000 Retained Earnings 92,600 95,100 Totals $611,100 $545,700 Additional data: 1. Equipment that cost $9,900 and was 60% depreciated was sold in 2020. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in exchange for land. 4. Investments that cost $34,700 were sold during the year. 5. There were no write-offs of uncollectible accounts during the year. Riverbed’s 2020 income statement is as follows. Sales revenue $952,300 Less: Cost of goods sold 604,800 Gross profit 347,500 Less: Operating expenses (includes depreciation expense and bad debt expense) 247,700 Income from operations 99,800 Other revenues and expenses Gain on sale of investments $15,100 Loss on sale of equipment (3,000 ) 12,100 Income before taxes 111,900 Income taxes 44,500 Net income $67,400 (a) Compute net cash provided by operating activities under the direct 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.
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RIVERBED COMPANY
COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 |
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Debit Balances
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2020
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2019
|
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| Cash |
$69,300
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$51,100
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154,900
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130,000
|
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| Inventory |
75,600
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60,700
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| Debt investments (available-for-sale) |
54,500
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85,100
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| Equipment |
70,600
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48,100
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| Buildings |
146,000
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146,000
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| Land |
40,200
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24,700
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| Totals |
$611,100
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$545,700
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Credit Balances
|
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| Allowance for Doubtful Accounts |
$10,100
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$7,900
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20,900
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13,900
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| Accumulated Depreciation—Buildings |
37,300
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28,200
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| Accounts Payable |
66,100
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60,600
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| Income Taxes Payable |
12,100
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10,000
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| Long-Term Notes Payable |
62,000
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70,000
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| Common Stock |
310,000
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260,000
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|
92,600
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95,100
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| Totals |
$611,100
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$545,700
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Additional data:
| 1. | Equipment that cost $9,900 and was 60% |
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| 2. | Cash dividends were declared and paid during the year. | |
| 3. | Common stock was issued in exchange for land. | |
| 4. | Investments that cost $34,700 were sold during the year. | |
| 5. | There were no write-offs of uncollectible accounts during the year. |
Riverbed’s 2020 income statement is as follows.
| Sales revenue |
$952,300
|
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| Less: Cost of goods sold |
604,800
|
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| Gross profit |
347,500
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| Less: Operating expenses (includes depreciation expense and |
247,700
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| Income from operations |
99,800
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| Other revenues and expenses | |||||
| Gain on sale of investments |
$15,100
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| Loss on sale of equipment |
(3,000
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)
|
12,100
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| Income before taxes |
111,900
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| Income taxes |
44,500
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| Net income |
$67,400
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(a) Compute net cash provided by operating activities under the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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