The comparative balance sheet of Hirayama Industries Inc. for December 31, 20Y2 and 20Y1, is as follows: Dec. 31, 20Y2 Dec. 31, 20Y1 Assets Cash $234 $18 Accounts receivable (net) 70 63 Inventories 150 127 Land 320 422 Equipment 262 224 Accumulated depreciation—equipment (87) (54) Total assets $949 $800 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) $65 $47 Dividends payable 6 - Common stock, $1 par 160 102 Excess of paid-in capital over par 109 90 Retained earnings 609 561 Total liabilities and stockholders' equity $949 $800 The following additional information is taken from the records: Land was sold for $153. Equipment was acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $79 credit to Retained
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.
The comparative
| Dec. 31, 20Y2 | Dec. 31, 20Y1 | ||||
| Assets | |||||
| Cash | $234 | $18 | |||
| 70 | 63 | ||||
| Inventories | 150 | 127 | |||
| Land | 320 | 422 | |||
| Equipment | 262 | 224 | |||
| (87) | (54) | ||||
| Total assets | $949 | $800 | |||
| Liabilities and |
|||||
| Accounts payable (merchandise creditors) | $65 | $47 | |||
| Dividends payable | 6 | - | |||
| Common stock, $1 par | 160 | 102 | |||
| Excess of paid-in capital over par | 109 | 90 | |||
| 609 | 561 | ||||
| Total liabilities and stockholders' equity | $949 | $800 |
The following additional information is taken from the records:
- Land was sold for $153.
- Equipment was acquired for cash.
- There were no disposals of equipment during the year.
- The common stock was issued for cash.
- There was a $79 credit to Retained Earnings for net income.
- There was a $31 debit to Retained Earnings for cash dividends declared.
a. Prepare a statement of
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| Adjustments to reconcile net income to net cash flows from (used for) operating activities: | ||
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| Changes in current operating assets and liabilities: | ||
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| Net cash flow from operating activities | $fill in the blank 38050a046fa5011_13 | |
| Cash flows from (used for) investing activities: | ||
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| Net cash flow from investing activities | fill in the blank 38050a046fa5011_18 | |
| Cash flows from (used for) financing activities: | ||
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| Net cash flows from financing activities | fill in the blank 38050a046fa5011_23 | |
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| Cash balance, January 1, 20Y2 | fill in the blank 38050a046fa5011_26 | |
| Cash balance, December 31, 20Y2 | $fill in the blank 38050a046fa5011_27 |
b. Was Hirayama Industries Inc.’s net cash flows from operations more or less than net income?
The cash flow statement is prepared to record the cash flow from various activities during the period.
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