Dec. 31, 2016 Dec. 31, 2015 Assets Cash ..... $ 146,600 $ 179,800 Accounts receivable (net) . 224,600 242,000 Merchandise inventory . 321,600 299,200 Prepaid expenses 13,400 9,600 Equipment.... 655,000 537,000 Accumulated depreciation-equipment . (170,800) $1,190,400 (132,200) $ 1,135,400 Total assets .... Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) ... Mortgage note payable...... Common stock, $10 par... Paid-in capital: Excess of issue price over par-common stock ..... Retained earnings.... Total liabilities and stockholders' equity.. $ 250,200 $ 237,600 336,000 74,000 24,000 470,000 320,000 396,200 217,800 $1,190,400 $1,135,400
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.
The comparative balance sheet of Del Ray Enterprises Inc. at December 31, 2016 and 2015, is as follows:
Additional data obtained from the income statement and from an examination of the
accounts in the ledger for 2016 are as follows:
a. Net income, $332,000
b.
c. Equipment was purchased at a cost of $162,800 and fully depreciated equipment costing $44,800 was discarded, with no salvage realized.
d. The mortgage note payable was not due until 2018 but the terms permitted earlier
payment without penalty.
e. 10,000 shares of common stock were issued at $20 for cash.
f. Cash dividends declared and paid, $153,600
Instructions
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities
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