Please help The comparative balance sheets and income statements for Gypsy Company follow. Balance Sheets As of December 31 Year 2 Year 1 Assets Cash $22,225 $2,960 Accounts receivable 1,625 975 Inventory 6,305 5,911 Equipment 18,020 41,800 Accumulated depreciation—equipment (7,059) (16,483) Land 19,286 9,656 Total assets $60,402 $44,819 Liabilities and equity Accounts payable (inventory) $2,494 $4,029 Long-term debt 2,649 6,055 Common stock 22,300 9,500 Retained earnings 32,959 25,235 Total liabilities and equity $60,402 $44,819 Income Statement For the Year Ended December 31, Year 2 Sales revenue $31,260 Cost of goods sold (12,390) Gross margin 18,870 Depreciation expense (3,901) Operating income 14,969 Gain on sale of equipment 550 Loss on disposal of land (70) Net income $15,449 Additional Data During Year 2, the company sold equipment for $18,225; it had originally cost $31,000. Accumulated depreciation on this equipment was $13,325 at the time of the sale. Also, the company purchased equipment for $7,220 cash. The company sold land that had cost $3,170. This land was sold for $3,100, resulting in the recognition of a $70 loss. Also, common stock was issued in exchange for title to land that was valued at $12,800 at the time of exchange. Paid dividends of $7,725. Required Prepare a statement of cash flows using the indirect method. (Cash outflows should be indicated with a minus sign.)
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.
Please help
The comparative balance sheets and income statements for Gypsy Company follow.
| Balance Sheets | ||
| As of December 31 | ||
| Year 2 | Year 1 | |
|---|---|---|
| Assets | ||
| Cash | $22,225 | $2,960 |
| Accounts receivable | 1,625 | 975 |
| Inventory | 6,305 | 5,911 |
| Equipment | 18,020 | 41,800 |
| (7,059) | (16,483) | |
| Land | 19,286 | 9,656 |
| Total assets | $60,402 | $44,819 |
| Liabilities and equity | ||
| Accounts payable (inventory) | $2,494 | $4,029 |
| Long-term debt | 2,649 | 6,055 |
| Common stock | 22,300 | 9,500 |
| 32,959 | 25,235 | |
| Total liabilities and equity | $60,402 | $44,819 |
| Income Statement | |
| For the Year Ended December 31, Year 2 | |
| Sales revenue | $31,260 |
|---|---|
| Cost of goods sold | (12,390) |
| Gross margin | 18,870 |
| Depreciation expense | (3,901) |
| Operating income | 14,969 |
| Gain on sale of equipment | 550 |
| Loss on disposal of land | (70) |
| Net income | $15,449 |
Additional Data
During Year 2, the company sold equipment for $18,225; it had originally cost $31,000. Accumulated depreciation on this equipment was $13,325 at the time of the sale. Also, the company purchased equipment for $7,220 cash.
The company sold land that had cost $3,170. This land was sold for $3,100, resulting in the recognition of a $70 loss. Also, common stock was issued in exchange for title to land that was valued at $12,800 at the time of exchange.
Paid dividends of $7,725.
Required
Prepare a statement of
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