PR 16-3A Statement of cash flows—indirect method The comparative balance sheet of Whitman Co. at December 31, 2016 and 2015, is as follows: Dec. 31, 2016 Dec. 31, 2015 Assets Cash 918,000 964,800 Accounts Receivable (net) 828,900 761,940 Inventories 1,268,460 1,162,980 Prepaid Expenses 29,340 35,100 Land 315,900 479,700 Buildings 1,462,500 900,900 Accumulated depreciation-buildings (408,600) (382,320) Equipment 512,280 454,680 Accumulated depreciation-equipment (141,300) (158,760) Total Assets 4,785,480 4,219,020 Liabilities and Stockholders’ Equity Accounts Payable 922,500 958,320 Bonds Payable 270,000 0 Common Stock, $25 par 317,000 117,000 Paid-In capital: Excess of par, common stock 758,000 558,000 Retained earnings 2,517,980 2,585,700 Total liabilities and S. equity 4,785,480 4,219,020 The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 2016 are as follows: Account: LAND Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 479,700 Apr. 20 Realized $151,200 cash from sale 163,800 315,900 Account: Buildings Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 900,900 Apr. 20 Acquired for cash 561,600 1,462,500 Account: Accum. Depr.-Buildings Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 382,320 Dec. 31 Depreciation for year 26,280 408,600 Account: Equipment Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 454,680 Jan. 26 Discarded, no salvage 46,800 407,880 Aug. 11 Purchased for cash 104,400 512,280 Account: Accum. Depr.-Equipment Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 158,760 Jan. 26 Equipment discarded 46,800 111,960 Dec. 31 Depreciation for year 29,340 141,300 Account: Bonds Payable Balance Date Item Debit Credit Debit Credit May 1 Issued 20-year bonds 270,000 270,000 Account: Common Stock, $25 par Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 117,000 Dec. 7 Issued 8,000 shares of common stock for $50 per share 200,000 317,000 Account: Paid-In Capital in Excess of Par, Common Stock Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 558,000 Dec. 7 Issued 8,000 shares of common stock for $50 per share 200,000 758,000 Account: Retained Earnings Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 2,585,700 Dec. 31 Net Loss 35,320 2,550,380 Dec. 31 Cash Dividends 32,400 2,517,980
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.
PR 16-3A Statement of cash flows —indirect method
The comparative
|
|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Assets |
|
|
|
Cash |
918,000 |
964,800 |
|
|
828,900 |
761,940 |
|
Inventories |
1,268,460 |
1,162,980 |
|
Prepaid Expenses |
29,340 |
35,100 |
|
Land |
315,900 |
479,700 |
|
Buildings |
1,462,500 |
900,900 |
|
|
(408,600) |
(382,320) |
|
Equipment |
512,280 |
454,680 |
|
Accumulated depreciation-equipment |
(141,300) |
(158,760) |
|
Total Assets |
4,785,480 |
4,219,020 |
|
Liabilities and |
|
|
|
Accounts Payable |
922,500 |
958,320 |
|
Bonds Payable |
270,000 |
0 |
|
Common Stock, $25 par |
317,000 |
117,000 |
|
Paid-In capital: Excess of par, common stock |
758,000 |
558,000 |
|
|
2,517,980 |
2,585,700 |
|
Total liabilities and S. equity |
4,785,480 |
4,219,020 |
The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 2016 are as follows:
|
Account: |
LAND |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
479,700 |
|
|
Apr. 20 |
Realized $151,200 cash from sale |
|
163,800 |
315,900 |
|
|
Account: |
Buildings |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
900,900 |
|
|
Apr. 20 |
Acquired for cash |
561,600 |
|
1,462,500 |
|
|
Account: |
Accum. Depr.-Buildings |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
|
382,320 |
|
Dec. 31 |
Depreciation for year |
|
26,280 |
|
408,600 |
|
Account: |
Equipment |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
454,680 |
|
|
Jan. 26 |
Discarded, no salvage |
|
46,800 |
407,880 |
|
|
Aug. 11 |
Purchased for cash |
104,400 |
|
512,280 |
|
|
Account: |
Accum. Depr.-Equipment |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
|
158,760 |
|
Jan. 26 |
Equipment discarded |
46,800 |
|
|
111,960 |
|
Dec. 31 |
Depreciation for year |
|
29,340 |
|
141,300 |
|
Account: |
Bonds Payable |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
May 1 |
Issued 20-year bonds |
|
270,000 |
|
270,000 |
|
Account: |
Common Stock, $25 par |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
|
117,000 |
|
Dec. 7 |
Issued 8,000 shares of common stock for $50 per share |
|
200,000 |
|
317,000 |
|
Account: |
Paid-In Capital in Excess of Par, Common Stock |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
|
558,000 |
|
Dec. 7 |
Issued 8,000 shares of common stock for $50 per share |
|
200,000 |
|
758,000 |
|
Account: |
Retained Earnings |
|
|
Balance |
|
|
Date |
Item |
Debit |
Credit |
Debit |
Credit |
|
Jan. 1 |
Balance |
|
|
|
2,585,700 |
|
Dec. 31 |
Net Loss |
35,320 |
|
|
2,550,380 |
|
Dec. 31 |
Cash Dividends |
32,400 |
|
|
2,517,980 |
Instructions
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
