TIGER ENTERPRISES Income Statement For the Year Ended December 31, 2021 ($ in thousands) Sales revenue $ 7,660 Operating expenses: $ 3,470 Depreciation expense 350 Insurance expense 210 General and administrative expense 1,910 Total operating expenses 5940 Income before income taxes 1,720 Income tax expense (710) Net income $ 1,010 Balance Sheet Information (S in thousands) Dec 31, 2021 Dec 31, 2020 Assets: Cash $ 410 $ 310 Accounts receivable 860 940 Inventory 750 710 Prepaid insurance 105 75 Equipment $ 2,650 $ 2,350 Less: Accumulated depreciation (1,060) (710) Total assets $ 3,715 $ 3,675 Liabilities and Shareholders’ Equity: Accounts payable 410 470 Accrued liabilities (for general & administrative expense 410 510 Income taxes payable 310 260 Notes payable (due 12/31/2022) 910 710 Common stock 1,010 910 Retained earnings 665 815 Total liabilities and shareholders’ equity $ 3,715 $ 3,675 Required: Prepare the cash flows form operating activities section of Tiger’s 2021 statement of cash flows using the direct method. Assume that all purchases and sales of inventory are on account, and that there are no anticipated bad debts for accounts receivable.
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.
TIGER ENTERPRISES
Income Statement
For the Year Ended December 31, 2021
($ in thousands)
Sales revenue $ 7,660
Operating expenses: $ 3,470
Insurance expense 210
General and administrative expense 1,910
Total operating expenses 5940
Income before income taxes 1,720
Income tax expense (710)
Net income $ 1,010
Balance Sheet Information (S in thousands) Dec 31, 2021 Dec 31, 2020
Assets:
Cash $ 410 $ 310
Accounts receivable 860 940
Inventory 750 710
Prepaid insurance 105 75
Equipment $ 2,650 $ 2,350
Less:
Total assets $ 3,715 $ 3,675
Liabilities and Shareholders’ Equity:
Accounts payable 410 470
Accrued liabilities (for general & administrative expense 410 510
Income taxes payable 310 260
Notes payable (due 12/31/2022) 910 710
Common stock 1,010 910
Total liabilities and shareholders’ equity $ 3,715 $ 3,675
Required:
Prepare the
TIGER ENTERPRISES
Statement of Cash Flows
For the Year Ended December 31, 2021
($ in thousands)
Cash flows from operating activities:
______________________________ __________________
______________________________ __________________
______________________________ ___________________
______________________________ __________________
______________________________ ____________________
______________________________ ____________________
Net cash flows from operating activities $ 0
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