Prepare a vertical analysis for the balance sheet data given below. (Round to two decimal places.) Petals, Inc. Balance Sheet December 31, 2019 Assets Current Assets: Cash and Cash Equivalents $10,000 Accounts Receivable, Net 15,600 Merchandise Inventory 38,000 Total Current Assets 63,600 Long-term Investments 15,000 Property, Plant, and Equipment, Net 195,000 Total Assets $273,600 Liabilities Current Liabilities: Accounts Payable $8,500 Notes Payable 1,400 Total Current Liabilities 9,900 Long-term Liabilities 54,000 Total Liabilities 63,900 Stockholders' Equity Common Stock 161,000 Retained Earnings 48,700 Total Stockholders' Equity 209,700 Total Liabilities and Stockholders' Equity $273,600
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 vertical analysis for the
Petals, Inc.
Balance Sheet
December 31, 2019
Assets
Current Assets:
Cash and Cash Equivalents $10,000
Merchandise Inventory 38,000
Total Current Assets 63,600
Long-term Investments 15,000
Property, Plant, and Equipment, Net 195,000
Total Assets $273,600
Liabilities
Current Liabilities:
Accounts Payable $8,500
Notes Payable 1,400
Total Current Liabilities 9,900
Long-term Liabilities 54,000
Total Liabilities 63,900
Common Stock 161,000
Total Stockholders' Equity 209,700
Total Liabilities and Stockholders' Equity $273,600
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