The comparative balance sheets for Pharoah Company as of December 31 are presented below. Pharoah Company Comparative Balance Sheets December 31 Assets 2022 2021 Cash $ 55,760 $ 36,900 Accounts receivable 41,000 47,560 Inventory 124,189 116,440 Prepaid expenses 12,530 17,220 Land 118,900 106,600 Buildings 164,000 164,000 Accumulated depreciation-buildings (49,200 ) (32,800 ) Equipment 184,500 127,100 (36,900 ) $614,779 (28,700 ) Accumulated depreciation-equipment Total $554,320 Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock, $1 par $ 36,679 $ 29,520 246,000 246,000 164,000 131,200 Retained earnings 168,100 147,600 Total $614,779 $554,320 Additional information: Operating expenses include depreciation expense of $34,440 ($16,400 of depreciation expense for buildings and $18,040 for equipment). 1. 2. Land was sold for cash at book value. 3. Cash dividends of $9,840 were paid. 4. Net income for 2022 was $30,340. 5. Equipment was purchased for $75,440 cash. In addition, equipment costing $18,040 with a book value of $8,200 was sold for $6,560 cash. 6. 32,800 shares of $1 par value common stock were issued in exchange for land with a fair value of $32,800. Prepare a statement of cash flows for the year ended December 31, 2022, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
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.
Prepare a statement of
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