QS 16-13 (Algo) Computing cash from asset sales LO P3 CRUZ, INCORPORATED Comparative Balance Sheets At December 31 Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Furniture Accumulated depreciation-Furniture Total assets Liabilities and Equity Accounts payable Wages payable 2021 2020 $ 69,200 29,700 $ 17,200 36,500 62,200 68,500 3,800 3,100 164,900 76,600 (11,900) 125,300 $ 229,600 $ 10,800 6,400 87,800 (6,700) $ 206,400 $ 15,200 3,600 Income taxes payable 1,100 2,000 Total current liabilities Notes payable (long-term) Total liabilities Equity Common stock, $5 par value Retained earnings 18,300 20,800 22,700 53,100 41,000 73,900 162,900 25,700 127,800 4,700 Total liabilities and equity $ 229,600 $ 206,400 CRUZ, INCORPORATED Income Statement For Year Ended December 31, 2021 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Income before taxes Income taxes expense Net income $ 353,400 227,500 125,900 64,500 27,200 34,200 12,400 $ 21,800 Furniture costing $67,100 is sold at its book value in 2021. Acquisitions of furniture total $55,900 cash, on which no depreciation is necessary because it is acquired at year-end. Complete the general ledger accounts to calculate cash received from the sale of furniture. Beginning balance Purchase of assets Sale of assets Ending balance Furniture Accumulated Depreciation Beginning balance 2021 depreciation Sale of assets Ending balance Cost Accumulated depreciation 0 Book value (Cash received) $ 0
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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