Statement of Cash Flows-Indirect Method The following balances are available for Chrisman Company: December 31 Cash Accounts receivable Inventory Prepaid rent Land Plant and equipment Accumulated depreciation Totals Accounts payable Income taxes payable Short-term notes payable Bonds payable Common stock Retained earnings Totals 2016 2015 $12,100 $15,100 30,300 22,700 24,000 40,100 13,600 9,100 113,400 113,400 605,000 453,800 (98,300) (45,400) $700,100 $608,800 $18,200 $15,100 7,600 37,800 113,000 151,000 302,500 226,900 4,500 52,900 209,000 170,400 $700,100 $608,800 Bonds were retired during 2016 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $52,900. Net income was reported at $38,600. Required: 1. Prepare a statement of cash flows for 2016 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash. Chrisman Company Statement of Cash Flows For the Year Ended December 31, 2016 Cash Flows from Operating Activities Adjustments to reconcile net income to net cash provided by operating activities: Cash Flows from Investing Activities Cash Flows from Financing Activities Cash balance, December 31, 2015 Cash balance, December 31, 2016 QQQQQQ
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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