The following are financial statements of Carla Vista Co.. Carla Vista Co. Income Statement For the Year Ended December 31, 2022 Net sales $2,247,500 Cost of goods sold 1,018,500 Selling and administrative expenses 901,000 Interest expense 82,000 Income tax expense 75,000 Net income $ 171,000 Carla Vista Co. Balance Sheet December 31, 2022 Assets Current assets Cash $ 56,300 Debt investments 81,000 Accounts receivable (net) 169,500 Inventory 118,900 Total current assets 425,700 Plant assets (net) 574,000 Total assets $ 999,700 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 161,000 Income taxes payable 37,000 Total current liabilities 198,000 Bonds payable 201,880 Total liabilities 399,880 Stockholders’ equity Common stock 355,000 Retained earnings 244,820 Total stockholders’ equity 599,820 Total liabilities and stockholders’ equity $999,700
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 following are financial statements of Carla Vista Co..
| Carla Vista Co. Income Statement For the Year Ended December 31, 2022 |
||
|---|---|---|
|
Net sales
|
$2,247,500 | |
|
Cost of goods sold
|
1,018,500 | |
|
Selling and administrative expenses
|
901,000 | |
|
Interest expense
|
82,000 | |
|
Income tax expense
|
75,000 | |
|
Net income
|
$ 171,000 |
| Carla Vista Co. Balance Sheet December 31, 2022 |
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|---|---|---|
|
Assets
|
||
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Current assets
|
||
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Cash
|
$ 56,300 | |
|
Debt investments
|
81,000 | |
|
|
169,500 | |
|
Inventory
|
118,900 | |
|
Total current assets
|
425,700 | |
|
Plant assets (net)
|
574,000 | |
|
Total assets
|
$ 999,700 | |
|
Liabilities and
|
||
|
Current liabilities
|
||
|
Accounts payable
|
$ 161,000 | |
|
Income taxes payable
|
37,000 | |
|
Total current liabilities
|
198,000 | |
|
Bonds payable
|
201,880 | |
|
Total liabilities
|
399,880 | |
|
Stockholders’ equity
|
||
|
Common stock
|
355,000 | |
|
|
244,820 | |
|
Total stockholders’ equity
|
599,820 | |
|
Total liabilities and stockholders’ equity
|
$999,700 |
Additional information: The net cash provided by operating activities for 2022 was $192,000. The cash used for capital expenditures was $91,500. The cash used for dividends was $32,300. The weighted-average common shares outstanding during the year was 50,000.
| (a) | Compute the following values and ratios for 2022. (We provide the results from 2021 for comparative purposes.) (Round |
| (i) | ||
| (ii) | Current ratio. (2021: 1.65:1) | |
| (iii) | ||
| (iv) | Debt to assets ratio. (2021: 31%) | |
| (v) | Earnings per share. (2021: $3.15) |
| (i) |
Working capital
|
$enter a dollar amount
|
|||
|---|---|---|---|---|---|
| (ii) |
Current ratio
|
enter amount rounded to 2 decimal places
|
:1 | ||
| (iii) |
Free cash flow
|
$enter a dollar amount
|
|||
| (iv) |
Debt to assets ratio
|
enter percentages rounded to 1 decimal place
|
% | ||
| (v) |
Earnings per share
|
$enter a dollar amount rounded to 2 decimal places
|
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