Problem 11-4A (Algo) Prepare a statement of cash flows-indirect method (LO11-2, 11-3, 11-4, 11-5) The income statement, balance sheets, and additional information for Video Phones, Incorporated, are provided. VIDEO PHONES, INCORPORATED Income Statement For the Year Ended December 31, 2024 Net sales Expenses: Cost of goods sold Operating expenses Depreciation expense. Loss on sale of land. Interest expense Income tax expense Total expenses Net income Assets Current assets: Cash Accounts receivable RECO Inventory Prepaid rent Long-term assets: Investments Land Equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Show Transcribed Text Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long-term assets: Investments Land Equipment Accumulated depreciation $2,000,000 868,000 28,000 8,100 15,500 49,000 Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable VIDEO PHONES, INCORPORATED Balance Sheets December 31 Total assets Liabilities and Stockholders' Equity Current liabilities: $3,086,000 2,968,600 $ 117,400 VIDEO PHONES, INCORPORATED Balance Sheets December 31 Stockholders' equity: Connon stock Retained earnings Total liabilities and stockholders' equity 2024 $182,860 82,100 105,000 12,240 106,000 211,000 272,000 (70,200) $901,000 2024 $182,860 82,100 105,000 12,240 106,000 211,000 272,000 (70,200) $901,000 $ 66,900 6,100 15, 100 287,000 310,000 215,900 $901,000 2023 $152,380 61,000 136,000 6,120 242,000 211,000 (42,200) $766,300 2023 $152,380 61,000 136,000 6,120 242,000 211,000 (42,200) $766,300 $ 82,000 10, 200 14,100 226,000 310,000 124,000 $766,300 Additional Information for 2024: 1. Purchased investment in bonds for $106,000. 2. Sold land for $22,900. The land originally was purchased for $31,000, resulting in a $8,100 loss being recorded at the time of the sale. 3. Purchased $61,000 in equipment by issuing a $61,000 long-term note payable to the seller. No cash was exchanged in the transaction. 4. Declared and paid a cash dividend of $25,500.
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.
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