Using the data from questions in the picture, prepare the operating section of the statement of cash flows using the direct 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.
Using the data from questions in the picture, prepare the operating section of the statement of
![Juneau Corporation
Income Statement
Year Ended December 31, 2019
Sales
$
210,000
Cost of Goods Sold
87,500
Gross profit
122,500
Operating expenses
95,900
Depreciation expense
10,500
Income from operations
16, 100
Other revenues and gains
Dividend revenue
$
1,575
Gain on sale of long term investment
5,250
6,825
22,925
Other expenses and losses
Losson sale of equipment
1,050
Interest expense
3,500
4,550
Income before income tax
18,375
Income tax
4,375
Netincome
$
14,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0f631781-6a76-44d6-a084-70b7dd986339%2Fb701fb39-4d02-4c67-86ab-a4851cc24661%2Fcdld4l_processed.jpeg&w=3840&q=75)
![Juneau Corporation
Balance Sheet
December 31, 2019
2019
2018
Assets
Current assets
Cash
$
1,750 $
1,400
Accounts receivable
7,875
5,425
Inventory
33,250
28,000
Prepaid expenses
1,225
1,050
Total current assets
44,100
35,875
Long term assets
Long term investments
17,500
21,000
Land
15,750
7,000
Buildings
100,000
100,000
Accumulated depreciation
61,500
58,000
Equipment
36,750
28,000
Accumulated depreciation
10,500
7,000
Total long term assets
98,000
142,100 $
91,000
Total assets
126,875
Liabilities and Shareholder's Equity
Currentliabilities
Accounts payable
15,750 $
17,500
Accrued liabilities
9,275
7,350
Interest payable
1,225
1,400
Current liabilities
26,250
26, 250
Long term liabilities
Notes payable
Bonds payable
8,750
6, 125
43,750
38,500
Total liabilities
78,750
70,875
Share hol der's Equity
Common shares
24,500
24,500
Retained earnings
Total shareholder's equity
Total liabilities and shareholder's equity
38,850
31,500
63,350
56,000
$
142,100 $
126,875](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0f631781-6a76-44d6-a084-70b7dd986339%2Fb701fb39-4d02-4c67-86ab-a4851cc24661%2F6yrw8er_processed.jpeg&w=3840&q=75)
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