Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF CORP. 2017 and 2018 Balance Sheets Assets Liabilities and Owners’ Equity 2017 2018 2017 2018 Current assets Current liabilities Cash $ 36,085 $ 39,400 Accounts payable $ 39,752 $ 43,432 Accounts receivable 18,651 29,296 Notes payable 20,708 17,475 Inventory 4,120 43,312 Other 21,394 25,994 Total $ 58,856 $ 112,008 Total $ 81,854 $ 86,901 Long-term debt $ 123,500 $ 187,898 Owners’ equity Common stock and paid-in surplus $ 56,700 $ 56,700 Accumulated retained earnings 262,962 302,692 Fixed assets Net plant and equipment $ 466,160 $ 522,183 Total $ 319,662 $ 359,392 Total assets $ 525,016 $ 634,191 Total liabilities and owners’ equity $ 525,016 $ 634,191 SMOLIRA GOLF CORP. 2018 Income Statement Sales $ 514,954 Cost of goods sold 365,278 Depreciation 46,588 Earnings before interest and taxes $ 103,088 Interest paid 21,383 Taxable income $ 81,705 Taxes (22%) 17,975 Net income $ 63,730 Dividends $ 24,000 Retained earnings 39,730 Prepare the 2018 statement of cash flows for Smolira Golf Corp. (Negative answers should be indicated by 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.
Problem 3-28 Statement of Cash Flows [LO1]
| Some recent financial statements for Smolira Golf Corp. follow. |
| SMOLIRA GOLF CORP. 2017 and 2018 |
||||||||||||||||
| Assets | Liabilities and Owners’ Equity | |||||||||||||||
| 2017 | 2018 | 2017 | 2018 | |||||||||||||
| Current assets | Current liabilities | |||||||||||||||
| Cash | $ | 36,085 | $ | 39,400 | Accounts payable | $ | 39,752 | $ | 43,432 | |||||||
| Accounts receivable | 18,651 | 29,296 | Notes payable | 20,708 | 17,475 | |||||||||||
| Inventory | 4,120 | 43,312 | Other | 21,394 | 25,994 | |||||||||||
| Total | $ | 58,856 | $ | 112,008 | Total | $ | 81,854 | $ | 86,901 | |||||||
| Long-term debt | $ | 123,500 | $ | 187,898 | ||||||||||||
| Owners’ equity | ||||||||||||||||
| Common stock and paid-in surplus | $ | 56,700 | $ | 56,700 | ||||||||||||
| |
262,962 | 302,692 | ||||||||||||||
| Fixed assets | ||||||||||||||||
| Net plant and equipment | $ | 466,160 | $ | 522,183 | Total | $ | 319,662 | $ | 359,392 | |||||||
| Total assets | $ | 525,016 | $ | 634,191 | Total liabilities and owners’ equity | $ | 525,016 | $ | 634,191 | |||||||
| SMOLIRA GOLF CORP. 2018 Income Statement |
|||||||
| Sales | $ | 514,954 | |||||
| Cost of goods sold | 365,278 | ||||||
| |
46,588 | ||||||
| Earnings before interest and taxes | $ | 103,088 | |||||
| Interest paid | 21,383 | ||||||
| Taxable income | $ | 81,705 | |||||
| Taxes (22%) | 17,975 | ||||||
| Net income | $ | 63,730 | |||||
| Dividends | $ | 24,000 | |||||
| Retained earnings | 39,730 | ||||||
|
Prepare the 2018 statement of cash flows for Smolira Golf Corp. (Negative answers should be indicated by a minus sign.) |
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