Required information [The following information applies to the questions displayed below.] Portions of the financial statements for Parnell Company are provided below. PARNELL COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands) Revenues and gains: Sales $850 Gain on sale of building Expenses and loss: Cost of goods sold Salaries 10 $860 $325 125 Insurance 45 Depreciation Interest expense Loss on sale of equipment 128 55 12 690 Income before tax 170 Income tax expense 85 Net income $ 85 PARNELL COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands) Year 2021 2020 Change Cash $ 144 2$ 95 49 Accounts receivable Inventory Prepaid insurance Accounts payable Salaries payable Deferred tax liability 334 211 123 (119) (37) 316 435 61 98 220 112 108 112 88 24 70 57 13 Bond discount 185 210 (25) Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)
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.
Required:
1. Prepare the
![Required information
[The following information applies to the questions displayed below.]
Portions of the financial statements for Parnell Company are provided below.
PARNELL COMPANY
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Revenues and gains:
Sales
$850
Gain on sale of building
10
$860
Expenses and loss:
Cost of goods sold
$325
Salaries
125
Insurance
45
Depreciation
Interest expense
128
55
Loss on sale of equipment
12
690
Income before tax
170
Income tax expense
85
Net income
$ 85
PARNELL COMPANY
Selected Accounts from Comparative Balance Sheets
December 31, 2021 and 2020
($ in thousands)
Year
Change
$
2021
2020
Cash
$ 144
$
95
49
Accounts receivable
334
211
123
(119)
(37)
Inventory
Prepaid insurance
Accounts payable
Salaries payable
Deferred tax liability
316
435
61
98
220
112
108
112
88
24
70
57
13
Bond discount
185
210
(25)
Required:
1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using
the direct method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be
deducted should be indicated with a minus sign.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa92125e1-6c9a-413f-8430-8fbeeff84ac1%2F6b06b75e-fded-4a79-b2d6-a9103a8b2bc0%2Fl1pdwmm_processed.jpeg&w=3840&q=75)
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