would like a second opinion on this below The comparative balance sheet and income statement of PAJ Co Ltd, have just been prepared and presented to the owners by the company’s Accountant. The owners are concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners. The owners have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial. PAJ Co Ltd Comparative Balance Sheet December 31, 2020, and 2021 2021 2020 Assets Cash and cash equivalent 350,000 450,000 Accounts Receivable 440,850 - Inventory 225,222 315,898 Prepaid expenses 185,000 185,000 Equipment, net 668,500 495,880 Total Assets 1,869,572 1,446,778 Liabilities Accounts payable - 198,500 Accrued liabilities 225,550 190,545 Bond payable 555,840 365,520 Stockholders' Equity: Common Stock 245,600 145,600 Retained earnings 1,037,582 711,613 Treasury stock (195,000) (165,000) Total liabilities and stockholders' equity 1,869,572 1,446,778 PAJ Co Ltd Income Statement Year Ended December 31,2021 Revenues and gains: Sales revenue 1,500,000 Gain on sale of equipment 28,000 Interest revenue Total revenues and gains 1,528,000 Expenses Cost of goods sold 704,500 Salary expense 185,000 Depreciation expense 40,000 Rent expense 200,000 Total expenses 1,129,500 Income before income taxes 398,500 Income tax expense 44,500 Net Profit 354,000 Notes Purchase of equipment 337,620 Cash receipt from sale of equipment 153,000 Issuance of bonds payable to borrow cash 190,320 Cash receipt from issuance of common stock 100,000 Dividend paid 28,031 Book value of equipment sold 125,000 Purchase of treasury stock 30,000 Prepare a complete statement of cash flows for December 2021 using the indirect method based on the information and guidance provided
I would like a second opinion on this below
The comparative
The owners have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial.
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PAJ Co Ltd |
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Comparative Balance Sheet |
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December 31, 2020, and 2021 |
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2021 |
2020 |
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Assets |
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Cash and cash equivalent |
350,000 |
450,000 |
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440,850 |
- |
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Inventory |
225,222 |
315,898 |
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Prepaid expenses |
185,000 |
185,000 |
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Equipment, net |
668,500 |
495,880 |
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Total Assets |
1,869,572 |
1,446,778 |
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Liabilities |
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Accounts payable |
- |
198,500 |
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Accrued liabilities |
225,550 |
190,545 |
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Bond payable |
555,840 |
365,520 |
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Common Stock |
245,600 |
145,600 |
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1,037,582 |
711,613 |
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(195,000) |
(165,000) |
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Total liabilities and stockholders' equity |
1,869,572 |
1,446,778 |
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PAJ Co Ltd |
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Income Statement |
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Year Ended December 31,2021 |
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Revenues and gains: |
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Sales revenue |
1,500,000 |
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Gain on sale of equipment |
28,000 |
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Interest revenue |
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Total revenues and gains |
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1,528,000 |
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Expenses |
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Cost of goods sold |
704,500 |
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Salary expense |
185,000 |
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40,000 |
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Rent expense |
200,000 |
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Total expenses |
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1,129,500 |
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Income before income taxes |
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398,500 |
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Income tax expense |
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44,500 |
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Net Profit |
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354,000 |
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Notes |
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Purchase of equipment |
337,620 |
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Cash receipt from sale of equipment |
153,000 |
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Issuance of bonds payable to borrow cash |
190,320 |
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Cash receipt from issuance of common stock |
100,000 |
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Dividend paid |
28,031 |
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Book value of equipment sold |
125,000 |
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Purchase of treasury stock |
30,000 |
- Prepare a complete statement of cash flows for December 2021 using the indirect method based on the information and guidance provided above.
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