Problem 11-2A Classify items and prepare the statement of cash flows (LO11-1, 11-3, 11-4, 11-5) Seth Erkenbeck, a recent college graduate, has just completed the basic format to be used in preparing the statement of cash flows (indirect method) for ATM Software Developers. All amounts are in thousands (000s). ATM SOFTWARE DEVELOPERS Statement of Cash Flows For the year ended December 31, 2021 Cash Flows from Operating Activities Net income $ Adjustments to reconcile net income to net cash flows from operating activities: Net cash flows from operating activities Cash Flows from Investing Activities Net cash flows from investing activities Cash Flows from Financing Activities Net cash flows from financing activities Net increase (decrease) in cash $ 2,805 Cash at the beginning of the period 7,180 Cash at the end of the period $ 9,985 Listed below in random order are line items to be included in the statement of cash flows. Cash received from the sale of land (no gain or loss) $ 8,570 Issuance of common stock 12,875 Depreciation expense 5,425 Increase in accounts receivable 4,010 Decrease in accounts payable 1,720 Issuance of long-term notes payable 16,295 Purchase of equipment 39,665 Decrease in inventory 1,435 Decrease in prepaid rent 865 Payment of dividends 6,290 Net income 11,600 Purchase of treasury stock 2,575 Required: Prepare the statement of cash flows for ATM Software Developers using the indirect method. (List cash outflows and any decrease in cash as negative amounts. Enter your answers in thousands (i.e., 10,000,000 should be entered as 10,000).)
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.
Problem 11-2A Classify items and prepare the statement of cash flows (LO11-1, 11-3, 11-4, 11-5)
Seth Erkenbeck, a recent college graduate, has just completed the basic format to be used in preparing the statement of cash flows (indirect method) for ATM Software Developers. All amounts are in thousands (000s).
| ATM SOFTWARE DEVELOPERS | |||
| Statement of Cash Flows | |||
| For the year ended December 31, 2021 | |||
| Cash Flows from Operating Activities | |||
| Net income | $ | ||
| Adjustments to reconcile net income to net cash flows from operating activities: | |||
| Net cash flows from operating activities | |||
| Cash Flows from Investing Activities | |||
| Net cash flows from investing activities | |||
| Cash Flows from Financing Activities | |||
| Net cash flows from financing activities | |||
| Net increase (decrease) in cash | $ | 2,805 | |
| Cash at the beginning of the period | 7,180 | ||
| Cash at the end of the period | $ | 9,985 | |
Listed below in random order are line items to be included in the statement of cash flows.
| Cash received from the sale of land (no gain or loss) | $ | 8,570 | |
| Issuance of common stock | 12,875 | ||
| 5,425 | |||
| Increase in |
4,010 | ||
| Decrease in accounts payable | 1,720 | ||
| Issuance of long-term notes payable | 16,295 | ||
| Purchase of equipment | 39,665 | ||
| Decrease in inventory | 1,435 | ||
| Decrease in prepaid rent | 865 | ||
| Payment of dividends | 6,290 | ||
| Net income | 11,600 | ||
| Purchase of |
2,575 | ||
Required:
Prepare the statement of cash flows for ATM Software Developers using the indirect method. (List
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