Presented below are the 2016 income statement and comparative balance sheets for Santana Industries. SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2016 ($ in thousands) Sales revenue $ 17,250 Service revenue 6,400 Total revenue $ 23,650 Operating expenses: Cost of goods sold 8,700 Selling 3,900 General and administrative 3,000 Total operating expenses 15,600 Operating income 8,050 Interest expense 350 Income before income taxes 7,700 Income tax expense
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.
| Presented below are the 2016 income statement and comparative balance sheets for Santana Industries. |
| SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2016 ($ in thousands) |
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| Sales revenue | $ | 17,250 | ||
| Service revenue | 6,400 | |||
| Total revenue | $ | 23,650 | ||
| Operating expenses: | ||||
| Cost of goods sold | 8,700 | |||
| Selling | 3,900 | |||
| General and administrative | 3,000 | |||
| Total operating expenses | 15,600 | |||
| Operating income | 8,050 | |||
| Interest expense | 350 | |||
| Income before income taxes | 7,700 | |||
| Income tax expense | 4,000 | |||
| Net income | $ | 3,700 | ||
| |
Dec. 31, 2016 |
Dec. 31, 2015 |
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| Assets: | ||||||
| Cash | $ | 8,850 | $ | 3,550 | ||
| |
5,500 | 3,700 | ||||
| Inventory | 7,000 | 4,500 | ||||
| Prepaid rent | 300 | 600 | ||||
| Plant and equipment | 17,500 | 15,000 | ||||
| Less: |
(6,600 | ) | (6,000 | ) | ||
| Total assets | $ | 32,550 | $ | 21,350 | ||
| Liabilities and Shareholders’ Equity: | ||||||
| Accounts payable | $ | 4,400 | $ | 2,600 | ||
| Interest payable | 250 | 0 | ||||
| Deferred service revenue | 1,100 | 750 | ||||
| Income taxes payable | 700 | 1,100 | ||||
| Loan payable (due 12/31/2015) | 8,000 | 0 | ||||
| Common stock | 11,500 | 11,500 | ||||
| |
6,600 | 5,400 | ||||
| Total liabilities and shareholders' equity | $ | 32,550 | $ | 21,350 | ||
| Additional information for the 2016 fiscal year ($ in thousands): | |
| 1. | Cash dividends of $2,500 were declared and paid. |
| 2. | Equipment costing $7,000 was purchased with cash. |
| 3. |
Equipment with a book value of $2,000 (cost of $4,500 less accumulated depreciation of $2,500) was sold for $2,000. |
| 4. | Depreciation of $3,100 is included in operating expenses. |
| Required: |
|
Prepare Santana Industries' 2016 statement of |
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