The 2021 comparative balance sheet and 2021 income statement of Gumdrop Fall Ltd, have just been prepared and presented to the owners by the company’s Accountant. After doing an examination of the financial information received, it was eventually discovered that there are some figures in the balance sheet that were erroneously omitted due to an oversight by the accountant who is not available to fix the problem due to his unavoidable absence from work. Also, they are concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company decided to use the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners. Gumdrop Fall Ltd Comparative Balance Sheet December 31, 2021 and 2020 2021 2020 Increase/(Decrease) ASSET(S) Cash and cash equivalent ??? ??? ??? Accounts Receivable 87,550 ??? 1,550 Inventories 93,900 98,540 ??? Fixed Assets, net 160,400 ??? 49,900 TOTAL ASSETS 373,350 316,890 56,460 LIABILITY(IES) Accrued Payable ??? ??? 950 Accrued Liabilities 22,850 24,940 ??? Long-term notes payable 82,000 140,500 (58,500) STOCKHOLDER EQUITY Common Stock ??? 61,500 125,300 Retained Earnings 54,800 ??? (9,200) TOTAL LIABILITIES & STOCKHOLDER EQUITY 373,350 316,890 56,460 Gumdrop Fall Ltd Income Statement Year Ended December 31,2021 Revenues and gains: Sales revenue 369,500 Interest revenue 11,800 Total revenues and gains 381,300 Expenses: Cost of Goods Sold 205,500 Depreciation expense 15,500 Other operating expense 126,000 Interest expense 24,300 TOTAL EXPENSES 371,300 Income before income taxes 10,000 Income tax expense 16,300 Net Loss (6300) Notes Purchase of fixed asset during 2021 = [65,400] Sale proceeds from sale of plant asset = [-] Receipt for issuance of notes payable = [-] Payment for note payable = [58,500] Dividend paid = [2,900] Book value of equipment sold = [-] Questions: How can the owners of this company use the cash flow information or what can the statement of cash flows help the owners to do? Redo the company’s comparative balance sheet for 2020/2021 using the information listed above and show the missing figures to include the appropriate sign as a positive or negative figure. Prepare a complete statement of cash flows for 2021 using the indirect method using the information listed above.

The 2021 comparative balance sheet and 2021 income statement of Gumdrop Fall Ltd, have just been prepared and presented to the owners by the company’s Accountant. After doing an examination of the financial information received, it was eventually discovered that there are some figures in the balance sheet that were erroneously omitted due to an oversight by the accountant who is not available to fix the problem due to his unavoidable absence from work. Also, they are concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company decided to use the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners. Gumdrop Fall Ltd Comparative Balance Sheet December 31, 2021 and 2020 2021 2020 Increase/(Decrease) ASSET(S) Cash and cash equivalent ??? ??? ??? Accounts Receivable 87,550 ??? 1,550 Inventories 93,900 98,540 ??? Fixed Assets, net 160,400 ??? 49,900 TOTAL ASSETS 373,350 316,890 56,460 LIABILITY(IES) Accrued Payable ??? ??? 950 Accrued Liabilities 22,850 24,940 ??? Long-term notes payable 82,000 140,500 (58,500) STOCKHOLDER EQUITY Common Stock ??? 61,500 125,300 Retained Earnings 54,800 ??? (9,200) TOTAL LIABILITIES & STOCKHOLDER EQUITY 373,350 316,890 56,460 Gumdrop Fall Ltd Income Statement Year Ended December 31,2021 Revenues and gains: Sales revenue 369,500 Interest revenue 11,800 Total revenues and gains 381,300 Expenses: Cost of Goods Sold 205,500 Depreciation expense 15,500 Other operating expense 126,000 Interest expense 24,300 TOTAL EXPENSES 371,300 Income before income taxes 10,000 Income tax expense 16,300 Net Loss (6300) Notes Purchase of fixed asset during 2021 = [65,400] Sale proceeds from sale of plant asset = [-] Receipt for issuance of notes payable = [-] Payment for note payable = [58,500] Dividend paid = [2,900] Book value of equipment sold = [-] Questions: How can the owners of this company use the cash flow information or what can the statement of cash flows help the owners to do? Redo the company’s comparative balance sheet for 2020/2021 using the information listed above and show the missing figures to include the appropriate sign as a positive or negative figure. Prepare a complete statement of cash flows for 2021 using the indirect method using the information listed above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The company decided to use the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners.

Gumdrop Fall Ltd Comparative Balance Sheet December 31, 2021 and 2020
	2021	2020	Increase/(Decrease)
ASSET(S)
Cash and cash equivalent	???	???	???
Accounts Receivable	87,550	???	1,550
Inventories	93,900	98,540	???
Fixed Assets, net	160,400	???	49,900
TOTAL ASSETS	373,350	316,890	56,460

LIABILITY(IES)
Accrued Payable	???	???	950
Accrued Liabilities	22,850	24,940	???
Long-term notes payable	82,000	140,500	(58,500)
STOCKHOLDER EQUITY
Common Stock	???	61,500	125,300
Retained Earnings	54,800	???	(9,200)
TOTAL LIABILITIES & STOCKHOLDER EQUITY	373,350	316,890	56,460

Gumdrop Fall Ltd Income Statement Year Ended December 31,2021
Revenues and gains:
Sales revenue	369,500
Interest revenue	11,800
Total revenues and gains		381,300

Expenses:
Cost of Goods Sold	205,500
Depreciation expense	15,500
Other operating expense	126,000
Interest expense	24,300
TOTAL EXPENSES		371,300

Income before income taxes		10,000
Income tax expense		16,300
Net Loss		(6300)

Notes

Purchase of fixed asset during 2021 = [65,400]

Sale proceeds from sale of plant asset = [-]

Receipt for issuance of notes payable = [-]

Payment for note payable = [58,500]

Dividend paid = [2,900]

Book value of equipment sold = [-]

Questions:

How can the owners of this company use the cash flow information or what can the statement of cash flows help the owners to do?

Redo the company’s comparative balance sheet for 2020/2021 using the information listed above and show the missing figures to include the appropriate sign as a positive or negative figure.

Prepare a complete statement of cash flows for 2021 using the indirect method using the information listed above.

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