The following information for the year ended December 31, 2021, was reported by Nice Bite, Incorporated Accounts Payable $ 54,000 Accounts Receivable 31,800 Cash (balance on January 1, 2021) 102,400 Cash (balance on December 31, 2021) 86,000 Common Stock 138,500 Dividends 0 Equipment 145,700 Income Tax Expense 11,000 Interest Expense 30,400 Inventory 18,100 Notes Payable 32,600 Office Expense 15,200 Prepaid Rent 7,900 Retained Earnings (beginning) 10,800 Salaries and Wages Expense 36,600 Service Revenue 155,800 Utilities Expense 26,000 Salaries and Wages Payable 17,000 Other cash flow information: Cash from issuing common stock $ 30,000 Cash paid to reacquire common stock 34,100 Cash paid for income taxes 11,900 Cash paid to purchase long-term assets 61,400 Cash paid to suppliers and employees 94,000 Cash received from customers 155,000 Required: Prepare an income statement for 2021.
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.
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The following information for the year ended December 31, 2021, was reported by Nice Bite, Incorporated
| Accounts Payable | $ 54,000 |
|---|---|
| 31,800 | |
| Cash (balance on January 1, 2021) | 102,400 |
| Cash (balance on December 31, 2021) | 86,000 |
| Common Stock | 138,500 |
| Dividends | 0 |
| Equipment | 145,700 |
| Income Tax Expense | 11,000 |
| Interest Expense | 30,400 |
| Inventory | 18,100 |
| Notes Payable | 32,600 |
| Office Expense | 15,200 |
| Prepaid Rent | 7,900 |
| 10,800 | |
| Salaries and Wages Expense | 36,600 |
| Service Revenue | 155,800 |
| Utilities Expense | 26,000 |
| Salaries and Wages Payable | 17,000 |
| Other |
|
|---|---|
| Cash from issuing common stock | $ 30,000 |
| Cash paid to reacquire common stock | 34,100 |
| Cash paid for income taxes | 11,900 |
| Cash paid to purchase long-term assets | 61,400 |
| Cash paid to suppliers and employees | 94,000 |
| Cash received from customers | 155,000 |
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Prepare an income statement for 2021.
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