Brown Company, had the following statements prepared as of December 31, 2020. Brown Company Comparative Balance Sheet As of December 31, 2020 and 2019 12/31/20 12/31/19 Cash $160,800 $38,400 Accounts receivable 123,200 49,000 Inventory 112,500 57,900 investments (available-for-sale) 90,000 101,000 factory assets 240,000 212,500 Total assets $726,500 $458,800 Accounts payable $100,000 $65,200 mortgage debt 50,000 77,000 accumulated depreciation 30,000 52,000 Common stock 175,000 131,100 Retained earnings 371,500 133,500 Total liabilities and stockholders' equity $726,500 $458,800
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.
Brown Company, had the following statements prepared as of December 31, 2020.
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Brown Company |
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12/31/20 |
12/31/19 |
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Cash |
$160,800 |
$38,400 |
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123,200 |
49,000 |
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Inventory |
112,500 |
57,900 |
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investments (available-for-sale) |
90,000 |
101,000 |
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factory assets |
240,000 |
212,500 |
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Total assets |
$726,500 |
$458,800 |
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Accounts payable |
$100,000 |
$65,200 |
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mortgage debt |
50,000 |
77,000 |
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accumulated |
30,000 |
52,000 |
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Common stock |
175,000 |
131,100 |
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371,500 |
133,500 |
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Total liabilities and |
$726,500 |
$458,800 |
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Brown Company |
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Sales revenue |
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$440,000 |
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Interest and other income (Including gain on sale of investment $5,000) |
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20,000 |
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460,000 |
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Less: |
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Cost of goods sold |
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130,000 |
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Selling and administrative expenses |
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10,000 |
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Depreciation |
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42,000 |
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income tax |
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5,000 |
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Interest expense |
$3,000 |
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Less on sale of factory assets |
12,000 |
202,000 |
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Net profit |
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258,000 |
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Cash dividend |
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20,000 |
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retained earnings in business |
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238,000 |
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Additional information:
New factory assets valued at $85,000 in principal were purchased during the year. $20,000 worth of common stock was issued in exchange for the Factory assets. Investments have been sold in the current year. No unrealized gains or losses have arisen from these securities.
Instructions
Prepare a statement of cash flows using the indirect method.
Note:
Please be more careful. This question is almost the same as the one that was uploaded. But some places have changed. Please do not directly copy the answer from before. Please take a closer look at the question. (Look at teh inventory, investment, and account payable) that is different number.
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