Preparing the Statement of Cash Flows The comparative balance sheets for Beckwith Products Company are presented below. 2019 2018 Assets: Cash $ 36,950 $ 25,000 Accounts receivable 75,100 78,000 Inventory 45,300 36,000 Property, plant, and equipment 256,400 153,000 Accumulated depreciation 38,650 20,000 Total assets $ 375,100 $ 272,000 Liabilities and Equity: Accounts payable $ 13,100 $ 11,000 Interest payable 11,500 8,000 Wages payable 8,100 9,000 Notes payable 103,200 90,000 Common stock 88,600 50,000 Retained earnings 150,600 104,000 Total liabilities and equity $375,100 $ 272,000 Additional Information: Net income for 2019 was $58,400. Cash dividends of $11,800 were declared and paid during 2019. During 2019, Beckwith issued $50,000 of notes payable and repaid $35,000 principal relating to notes payable. Common stock was issued for $38,600 cash. Depreciation expense was $16,850, and there were no disposals of equipment. Required: 1. Prepare a statement of cash flows (indirect method) for Beckwith Products for 2019. Use a minus sign to indicate any decreases in cash or cash outflows.
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.
Preparing the Statement of
The comparative balance sheets for Beckwith Products Company are presented below.
| 2019 | 2018 | ||
| Assets: | |||
| Cash | $ 36,950 | $ 25,000 | |
| Accounts receivable | 75,100 | 78,000 | |
| Inventory | 45,300 | 36,000 | |
| Property, plant, and equipment | 256,400 | 153,000 | |
| |
38,650 | 20,000 | |
| Total assets | $ 375,100 | $ 272,000 | |
| Liabilities and Equity: | |||
| Accounts payable | $ 13,100 | $ 11,000 | |
| Interest payable | 11,500 | 8,000 | |
| Wages payable | 8,100 | 9,000 | |
| Notes payable | 103,200 | 90,000 | |
| Common stock | 88,600 | 50,000 | |
| |
150,600 | 104,000 | |
| Total liabilities and equity | $375,100 | $ 272,000 |
Additional Information:
- Net income for 2019 was $58,400.
- Cash dividends of $11,800 were declared and paid during 2019.
- During 2019, Beckwith issued $50,000 of notes payable and repaid $35,000 principal relating to notes payable.
- Common stock was issued for $38,600 cash.
- Depreciation expense was $16,850, and there were no disposals of equipment.
Required:
1. Prepare a statement of cash flows (indirect method) for Beckwith Products for 2019. Use a minus sign to indicate any decreases in cash or
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