Prepare a statement of cash flows for the year 2012, following the proper format using following data: OLYMPIC, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 Revenue and gains: Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000 Dividend revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000 Gain on sales of plant assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31,000 Total revenue and gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..$940,000 Costs, expenses, and losses: Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000 Operating expenses (including depreciation of $40,000) . . . . . . . . . 300,000 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …35,000 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …36,000 Loss on sales of marketable securities . . . . . . . . . . . . . . . . . . . . . . … 4,000 Total costs, expenses, and losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 875,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …….. $ 65,000 OLYMPIC, INC. COMPARATIVE BALANCE SHEETS DECEMBER 31, 2011 AND 2010 2011 2010 Assets Current assets: Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,000 $ 20,000 Marketable Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 64,000 Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 12,000 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 80,000 Accrued Interest Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 3,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 90,000 Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 1,000 Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$373,000 $270,000 Plant and Equipment (net of accumulated depreciation) . . . . . . . . 616,000 500,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $989,000 $770,000 Liabilities & Stockholders’ Equity Current liabilities: Notes Payable (short-term). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,000 $ 55,000 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,000 61,000 Interest Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 15,000 Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 10,000 Other Accrued Expenses Payable . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 9,000 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $154,000 $150,000 Long-term liabilities: Notes Payable (long-term) . . . . . . . . . . . . . . 40,000 –0– Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 300,000 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $594,000 $450,000 Stockholders’ equity: Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 50,000 Additional Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 100,000 Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,000 170,000 Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $395,000 $320,000 Total liabilities & stockholders’ equity . . . . . . . . . . . . . . . . . . . . . .$989,000 $770,000
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.
Prepare a statement of cash flows for the year 2012, following the proper format using following data:
OLYMPIC, INC.
INCOME STATEMENT FOR THE YEAR ENDED
DECEMBER 31, 2011
Revenue and gains:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000
Dividend revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
Gain on sales of plant assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31,000
Total revenue and gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..$940,000
Costs, expenses, and losses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000
Operating expenses (including
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …35,000
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …36,000
Loss on sales of marketable securities . . . . . . . . . . . . . . . . . . . . . . … 4,000
Total costs, expenses, and losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 875,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …….. $ 65,000
OLYMPIC, INC.
COMPARATIVE BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
2011 2010
Assets Current assets:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,000 $ 20,000
Marketable Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 64,000
Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 12,000
Accrued Interest Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 3,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 90,000
Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 1,000
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$373,000 $270,000
Plant and Equipment (net of accumulated depreciation) . . . . . . . . 616,000 500,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $989,000 $770,000
Liabilities &
Notes Payable (short-term). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,000 $ 55,000
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,000 61,000
Interest Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 15,000
Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 10,000
Other Accrued Expenses Payable . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 9,000
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $154,000 $150,000
Long-term liabilities: Notes Payable (long-term) . . . . . . . . . . . . . . 40,000 –0–
Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 300,000
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $594,000 $450,000
Stockholders’ equity:
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 50,000
Additional Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 100,000
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $395,000 $320,000
Total liabilities & stockholders’ equity . . . . . . . . . . . . . . . . . . . . . .$989,000 $770,000
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