Balance Sheet Data December 31, 2019 March 31, 2020 $ 25,300 17,500 (1,000| 24,320 31,090 5 97,210 40,000 250,000 $ 79,400 8,300 (900) 49,320 48,590 3184,710 18,700 250,000 81,500 (16,250) Cash Marketable investments (at cost) Allowance for decrease in value Accounts receivable Inventory Total current assets Land Building Equipment Accumulated depreciation Equity investment (30% ownership of Titan Company) Other assets Totals (15,000| 61,220 15, 100 $448,530 5 21,220 Accounts payable Income taxes payable Total current liabilities Bonds payable Discount on bonds payable Deferred taxes payable Preferred stock Common stock Unrealized decrease in value of marketable 67,100 15,100 3600,860 $38,417 13,529 3 51,946 115,000 (2,150) 846 3 21,220 50,000 (2,300) 510 30,000 80,000 110,000 (1,000) 1900) (8,000) 147,118 187,000 $600,860 investments Dividends declared Retained earnings Other liabilities Totals 83,100 187,000 $448,530 Income Statement Data for the 3 Months Ended March 31, 2020 Sales Gain on sale of marketable investments Equity method earnings from Titan investment (30% ownership) Ordinary gain on condemnation of land Total revenues Cost of sales General and administrative expenses Depreciation Interest expense Income taxes $242,807 2,400 5,880 8,560 $259,647 $157,354 22,010 1,250 1,150 13,865 $195,629 Š 64,018 Total expenses Net income
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.
Comprehensive Angel Company has prepared its financial statements
for the year ended December 31, 2019, and for the 3 months ended
March 31, 2020. You have been asked to prepare a statement of
flows
sheet data at December 31, 2019, and March 31, 2020, and its income
statement data for the 3 months ended March 31, 2020, follow. You are
satisfied as to the correctness of the amounts presented.
Your discussion with the company's controller and a review of the
financial records have revealed the following information:
a. On January 7, 2020, the company sold marketable securities for
cash. These securities had cost $9,200, and had a fair value of
$8,600 at December 31. 2019. The remaining marketable securities were adjusted to their $7,400 fair value on March 31, 2020, by
adjustment of the related allowance account. The dividend and
interest revenue on these marketable securities is not material.
b. The company's
stock at a rate of one share of preferred for two shares of common.
The preferred stock and common stock have par values of $2 and
$1, respectively.
c. On January 16, 2020, 3 acres of land were condemned. An award
of $29,860 in cash was received on March 24, 2020. Purchase of
additional land as a replacement is not contemplated by the
company.
d. On March 25, 2020, the company purchased equipment for cash.
e. On March 26, 2020, bonds payable were issued by the company at
par for cash.
f. The equity investment representing a 30% ownership interest in
Titan Company included an amount of $9,600 attributable to an
increase in the recorded value of
31, 2019. This increase is being depreciated at a quarterly rate of
$480.
Required:
1. Prepare a spreadsheet to support the statement of cash flows for
Angel for the 3 months ended March 31, 2020.
2. Prepare the statement of cash flows.
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