Prepare a Statement of Cash Flows for Polly's Corporation at December 31, 2019 using the indirect method. Additonal information: 1. Net income for the year ended December 31, 2019 was $161,500. 2. Cash dividends were declared and paid in 2019. 3. Equipment with an original cost of $51,000 and with accumulated depreciation of $13,600 was sold for proceeds equal to book value during 2019. 4. The investments are reported at Fair Value at the balance sheet date. During 2016, an investment with a cost of $12,000 was purchased. No other investment transactions occurred during the year. Fair value adjustments are reported directly on the income statement. 5. In 2019, land was aquired through the issuance of common stock. The balance of the common stock issued was for cash. Polly's Corporation Balance Sheet December-31 2019 2018 Assets: Cash $ 32,300 $ 40,800 Accounts Receivable 79,900 107,100 Investments- trading 88,400 81,600 Equipment 425,000 345,100 Accumulated Depreciation- Eqp (147,900) (136,000) Land 86,700 49,300 Total Assets 564,400 487,900 Liabilities and Equity Accounts Payable $ 18,700 $ 6,800 Current portion of Long-Term Debt 8,000 10,000 Long-Term Note Payable 119,500 75,000 Common Stock 130,900 81,600 Retained Earnings 287,300 314,500 Total Liabilities and Equity 564,400 487,900
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.
Prepare a Statement of
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Additonal information: 1. Net income for the year ended December 31, 2019 was $161,500. 2. Cash dividends were declared and paid in 2019. 3. Equipment with an original cost of $51,000 and with 4. The investments are reported at Fair Value at the balance sheet date. During 2016, an investment with a cost of $12,000 was purchased. No other investment transactions occurred during the year. Fair value adjustments are reported directly on the income statement. 5. In 2019, land was aquired through the issuance of common stock. The balance of the common stock issued was for cash.
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| Polly's Corporation | |||||||
| Balance Sheet | |||||||
| December-31 | |||||||
| 2019 | 2018 | ||||||
| Assets: | |||||||
| Cash | $ 32,300 | $ 40,800 | |||||
| |
79,900 | 107,100 | |||||
| Investments- trading | 88,400 | 81,600 | |||||
| Equipment | 425,000 | 345,100 | |||||
| Accumulated Depreciation- Eqp | (147,900) | (136,000) | |||||
| Land | 86,700 | 49,300 | |||||
| Total Assets | 564,400 | 487,900 | |||||
| Liabilities and Equity | |||||||
| Accounts Payable | $ 18,700 | $ 6,800 | |||||
| Current portion of Long-Term Debt | 8,000 | 10,000 | |||||
| Long-Term Note Payable | 119,500 | 75,000 | |||||
| Common Stock | 130,900 | 81,600 | |||||
| |
287,300 | 314,500 | |||||
| Total Liabilities and Equity | 564,400 | 487,900 | |||||
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