The following information is taken from French Corporation’s financial statements: December 31 2018 2017 Cash $63,000 $ 27,000 Accounts receivable 102,000 80,000 Allowance for doubtful accounts (4,500) (3,100) Inventory 160,000 175,000 Prepaid expenses 7,500 6,800 Land 100,000 60,000 Buildings 294,000 244,000 Accumulated depreciation (32,000) (13,000) Patents 20,000 35,000 $710,000 $611,700 Accounts payable $ 90,000 $ 84,000 Accrued liabilities 54,000 63,000 Bonds payable 125,000 60,000 Common stock 100,000 100,000 Retained earnings—appropriated 80,000 10,000 Retained earnings—unappropriated 276,000 302,700 Treasury stock, at cost (15,000) (8,000) $710,000 $611,700 For 2018 Year Net income $78,300 Depreciation expense 19,000 Amortization of patents 5,000 Cash dividends declared and paid 35,000 Gain or loss on sale of patents none Instructions Prepare a statement of cash flows for French Corporation for the year 2018. (Use the indirect method.)
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 information is taken from French Corporation’s financial statements:
December 31
2018 2017
Cash $63,000 $ 27,000
Allowance for doubtful accounts (4,500) (3,100)
Inventory 160,000 175,000
Prepaid expenses 7,500 6,800
Land 100,000 60,000
Buildings 294,000 244,000
Patents 20,000 35,000
$710,000 $611,700
Accounts payable $ 90,000 $ 84,000
Accrued liabilities 54,000 63,000
Bonds payable 125,000 60,000
Common stock 100,000 100,000
Retained earnings—unappropriated 276,000 302,700
$710,000 $611,700
For 2018 Year
Net income $78,300
Depreciation expense 19,000
Amortization of patents 5,000
Cash dividends declared and paid 35,000
Gain or loss on sale of patents none
Instructions
Prepare a statement of
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