The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows: Dec. 31, 20Y3 Dec. 31, 20Y2 Assets Cash $ 251,860 $ 238,290 Accounts receivable (net) 92,610 84,960 Inventories 261,030 250,990 Investments 0 97,660 Land 133,790 0 Equipment 285,270 224,620 Accumulated depreciation-equipment (67,800) (60,500) Total assets $956,760 $836,020 Liabilities and Stockholders' Equity Accounts payable $ 172,940 $ 164,700 Accrued expenses payable 17,390 21,740 Dividends payable 9,400 7,500 Common stock, $1 par 51,100 39,290 Paid-in capital: Excess of issue price over par-common stock 194,400 113,700 Retained earnings 511,530 489,090 Total liabilities and stockholders’ equity $956,760 $836,020 The income statement for the year ended December 31, 20Y3, is as follows: Sales $1,583,070 Cost of merchandise sold 973,590 Gross profit $ 609,480 Operating expenses: Depreciation expense $ 7,300 Other operating expenses 516,080 Total operating expenses 523,380 Operating income $ 86,100 Other income: Gain on sale of investments 16,300 Income before income tax $ 102,400 Income tax expense 40,960 Net income $ 61,440 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: The investments were sold for $113,960 cash. Equipment and land were acquired for cash. There were no disposals of equipment during the year. The common stock was issued for cash. There was a $39,000 debit to Retained Earnings for cash dividends declared. Required: Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Navaria Inc. Statement of Cash Flows For the Year Ended December 31, 20Y3 Cash flows from operating activities: $fill in the blank 2 fill in the blank 4 fill in the blank 6 fill in the blank 8 Net cash flow from operating activities $fill in the blank 9 Cash flows from (used for) investing activities: $fill in the blank 11 fill in the blank 13 fill in the blank 15 Net cash flow used for investing activities fill in the blank 16 Cash flows from (used for) financing activities: $fill in the blank 18 fill in the blank 20 Net cash flow from financing activities fill in the blank 21 $fill in the blank 23 Cash at the beginning of the year fill in the blank 24 Cash at the end of the year $fill in the blank 25
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.
Statement of
The comparative
| Dec. 31, 20Y3 | Dec. 31, 20Y2 | ||||
| Assets | |||||
| Cash | $ 251,860 | $ 238,290 | |||
| 92,610 | 84,960 | ||||
| Inventories | 261,030 | 250,990 | |||
| Investments | 0 | 97,660 | |||
| Land | 133,790 | 0 | |||
| Equipment | 285,270 | 224,620 | |||
| (67,800) | (60,500) | ||||
| Total assets | $956,760 | $836,020 | |||
| Liabilities and |
|||||
| Accounts payable | $ 172,940 | $ 164,700 | |||
| Accrued expenses payable | 17,390 | 21,740 | |||
| Dividends payable | 9,400 | 7,500 | |||
| Common stock, $1 par | 51,100 | 39,290 | |||
| Paid-in capital: Excess of issue price over par-common stock | 194,400 | 113,700 | |||
| 511,530 | 489,090 | ||||
| Total liabilities and stockholders’ equity | $956,760 | $836,020 |
The income statement for the year ended December 31, 20Y3, is as follows:
| Sales | $1,583,070 | |
| Cost of merchandise sold | 973,590 | |
| Gross profit | $ 609,480 | |
| Operating expenses: | ||
| Depreciation expense | $ 7,300 | |
| Other operating expenses | 516,080 | |
| Total operating expenses | 523,380 | |
| Operating income | $ 86,100 | |
| Other income: | ||
| Gain on sale of investments | 16,300 | |
| Income before income tax | $ 102,400 | |
| Income tax expense | 40,960 | |
| Net income | $ 61,440 |
Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:
- The investments were sold for $113,960 cash.
- Equipment and land were acquired for cash.
- There were no disposals of equipment during the year.
- The common stock was issued for cash.
- There was a $39,000 debit to Retained Earnings for cash dividends declared.
Required:
Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities. Use the minus sign to indicate
| Navaria Inc. | ||
| Statement of Cash Flows | ||
| For the Year Ended December 31, 20Y3 | ||
| Cash flows from operating activities: | ||
| $fill in the blank 2 | ||
| fill in the blank 4 | ||
| fill in the blank 6 | ||
| fill in the blank 8 | ||
| Net cash flow from operating activities | $fill in the blank 9 | |
| Cash flows from (used for) investing activities: | ||
| $fill in the blank 11 | ||
| fill in the blank 13 | ||
| fill in the blank 15 | ||
| Net cash flow used for investing activities | fill in the blank 16 | |
| Cash flows from (used for) financing activities: | ||
| $fill in the blank 18 | ||
| fill in the blank 20 | ||
| Net cash flow from financing activities | fill in the blank 21 | |
| $fill in the blank 23 | ||
| Cash at the beginning of the year | fill in the blank 24 | |
| Cash at the end of the year | $fill in the blank 25 |
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