The comparative statements of crane company are presented here. Crane Company Income Statement For the Years Ended December 31 2022 2021 Net sales $1,810,000 $1,745,000 Cost of goods sold 1,005,000 970,000 Gross profit 805,000 775,000 Selling and administrative expenses 511,000 472,000 Income from operations 294,000 303,000 Other expenses and losses Interest expense 17,000 13,000 Income before income taxes 277,000 290,000 Income tax expense 77,500 76,000 Net income 199500 214000 Crane Company Balance Sheets 31-Dec Assets 2022 2021 Current assets Cash $59,000 $63,000 Debt investments (short-term) 68,000 49,000 Accounts receivable (net) 116,000 101,000 Inventory 122,000 114,000 Total current assets 365,000 327,000 Plant assets (net) 595,000 515,000 Total assets $960,000 $842,000 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $159,000 $144,000 Income taxes payable 42,000 41,000 Total current liabilities 201,000 185,000 Bonds payable 220,000 200,000 Total liabilities 421,000 385,000 Stockholders’ equity Common stock ($5 par) 275,000 295,000 Retained earnings 264,000 162,000 Total stockholders’ equity 539,000 457,000 Total liabilities and stockholders’ equity $960,000 $842,000 All sales were on credit. Net cash provided by operating activities for 2022 was $257,000. Capital expenditures were $123,000, and cash dividends paid were $97,500. Compute the following ratios for 2022. Solve (a) - (l)
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 statements of crane company are presented here.
| Crane Company | ||
| Income Statement | ||
| For the Years Ended December 31 | ||
| 2022 | 2021 | |
| Net sales | $1,810,000 | $1,745,000 |
| Cost of goods sold | 1,005,000 | 970,000 |
| Gross profit | 805,000 | 775,000 |
| Selling and administrative expenses | 511,000 | 472,000 |
| Income from operations | 294,000 | 303,000 |
| Other expenses and losses | ||
| Interest expense | 17,000 | 13,000 |
| Income before income taxes | 277,000 | 290,000 |
| Income tax expense | 77,500 | 76,000 |
| Net income | 199500 | 214000 |
| Crane Company | ||
| 31-Dec | ||
| Assets | 2022 | 2021 |
| Current assets | ||
| Cash | $59,000 | $63,000 |
| Debt investments (short-term) | 68,000 | 49,000 |
| |
116,000 | 101,000 |
| Inventory | 122,000 | 114,000 |
| Total current assets | 365,000 | 327,000 |
| Plant assets (net) | 595,000 | 515,000 |
| Total assets | $960,000 | $842,000 |
| Liabilities and |
||
| Current liabilities | ||
| Accounts payable | $159,000 | $144,000 |
| Income taxes payable | 42,000 | 41,000 |
| Total current liabilities | 201,000 | 185,000 |
| Bonds payable | 220,000 | 200,000 |
| Total liabilities | 421,000 | 385,000 |
| Stockholders’ equity | ||
| Common stock ($5 par) | 275,000 | 295,000 |
| |
264,000 | 162,000 |
| Total stockholders’ equity | 539,000 | 457,000 |
| Total liabilities and stockholders’ equity | $960,000 | $842,000 |
All sales were on credit. Net cash provided by operating activities for 2022 was $257,000. Capital expenditures were $123,000, and cash dividends paid were $97,500. Compute the following ratios for 2022.
Solve (a) - (l)
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