Portions of the financial statements for Hawkeye Company are provided below. HAWKEYE COMPANY Income statement For the Year Ended December 31, 2824 ($ in millions) Sales Cost of goods sold Gross margin Operating expenses: Salaries Depreciation Loss on sale of land Total operating expenses operating income other income (expense): Gain on sale of cash equivalents Interest expense Income before tax Income tax expense Net income HAWKEYE COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2024 and 2023 ($ in millions) Cash Accounts receivable Inventory Accounts payable salaries payable Interest payable Income tax payable 2024 Year $ 239 197 10 $ 226 402 874 217 187 69 97 2023 $ 287 435 857 248 202 57 118 $ 978 385 585 446 139 96 48 $ 48 Change $ 19 (33) (31) (15) 12 (21)
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.
![Required Information
Problem 21-9 (Algo) Cash flows from operating activities (direct method and Indirect method)-cash
equivalent [LO21-3, 21-4]
[The following information applies to the questions displayed below]
Portions of the financial statements for Hawkeye Company are provided below.
HAWKEYE COMPANY
Income Statement
For the Year Ended December 31, 2824
($ in millions)
Sales
Cost of goods sold
Gross margin
Operating expenses:
Salaries
Depreciation
Loss on sale of land.
Total operating expenses
Operating income
other income (expense):
Gain on sale of cash equivalents
Interest expense
Income before tax
Income tax expense
Net income
HAWKEYE COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2024 and 2023
($ in millions)
Cash
Accounts receivable
Inventory
Accounts payable
salaries payable
Interest payable
Income tax payable
2024
Year
$ 226
402
874
217
187
$ 239
197
10
69
97
2023
$ 207
435
857
248
202
57
118
$ 978
385
585
446
139
96
48
$ 48
Change
$ 19
(33)
27
(31)
(15)
12
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