Rize Kamishiro Corp. uses the direct method to prepare its statement of cash flows. Rize Kamishiro's trial balances at December 31, 2021 and 2022 are as follows: 12/31/22 12/31/21 Debits Cash P35,000 33,000 P32,000 Accounts receivable 30,000 47,000 95,000 5,000 Inventory Property, plant and equipment 31,000 100,000 4,500 Unamortized bond discount Cost of goods sold Selling expenses General and administrative expenses Interest expense Income tax expense 380,000 172,000 151,300 2,600 61,200 P976,100 250,000 141,500 137,000 4,300 20,400 P756,700 Credits Allowance for uncollectible accounts P1,300 16,500 25,000 21,000 5,300 45,000 50,000 9,100 44,700 538,800 P756,700 P1,100 Accumulated depreciation Trade accounts payable Income taxes payable Deferred tax liability 8% callable bonds payable Share capital Share premium Retained earnings Sales 15,000 17,500 27,100 4,600 20,000 40,000 7,500 64,600 778,700 P976,100 • Rize Kamishiro purchased P5,000 in equipment during 2022. • Rize Kamishiro allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. QUESTIONS: Based on the foregoing, what amounts should Rize Kamishiro report in its statement of cash flows for the year ended December 31, 2022 for- 1. Cash collected from customers? 2. Cash paid for goods to be sold? 3. Cash paid for interest? 4. Cash paid for income taxes? 5. Cash paid for selling expenses?
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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