Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending Balance Beginning Balance Cash $ 61,000 $ 72,650 Accounts receivable 51,200 55,000 Inventory 68,700 62,500 Total current assets 180,900 190,150 Property, plant, and equipment 186,000 175,000 Less accumulated depreciation 62,000 43,750 Net property, plant, and equipment 124,000 131,250 Total assets $ 304,900 $ 321,400 Accounts payable $ 40,000 $ 71,200 Income taxes payable 31,200 36,700 Bonds payable 75,000 62,500 Common stock 87,500 75,000 Retained earnings 71,200 76,000 Total liabilities and stockholders’ equity $ 304,900 $ 321,400 During the year, Ravenna paid a $7,500 cash dividend and it sold a piece of equipment for $3,750 that had originally cost $7,800 and had accumulated depreciation of $5,200. The company did not retire any bonds or repurchase any of its own common stock during the year. Questions: A) What is the amount and direction (+ or −) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows? B) What is the amount of net cash provided by (used in) operating activities in the company’s statement of cash flows? C) What is the amount of gross cash outflows reported in the investing section of the company’s statement of cash flows?
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.
Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:
| Ending Balance | Beginning Balance | ||||
| Cash | $ | 61,000 | $ | 72,650 | |
| 51,200 | 55,000 | ||||
| Inventory | 68,700 | 62,500 | |||
| Total current assets | 180,900 | 190,150 | |||
| Property, plant, and equipment | 186,000 | 175,000 | |||
| Less |
62,000 | 43,750 | |||
| Net property, plant, and equipment | 124,000 | 131,250 | |||
| Total assets | $ | 304,900 | $ | 321,400 | |
| Accounts payable | $ | 40,000 | $ | 71,200 | |
| Income taxes payable | 31,200 | 36,700 | |||
| Bonds payable | 75,000 | 62,500 | |||
| Common stock | 87,500 | 75,000 | |||
| 71,200 | 76,000 | ||||
| Total liabilities and |
$ | 304,900 | $ | 321,400 | |
During the year, Ravenna paid a $7,500 cash dividend and it sold a piece of equipment for $3,750 that had originally cost $7,800 and had accumulated depreciation of $5,200. The company did not retire any bonds or repurchase any of its own common stock during the year.
Questions:
A) What is the amount and direction (+ or −) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows?
B) What is the amount of net cash provided by (used in) operating activities in the company’s statement of cash flows?
C) What is the amount of gross
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Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its
statement of cash flows. Its balance sheet for this year is as follows:
Ending
Balance
$ 61,000
51,200
68,700
Beginning
Balance
$ 72,650
Cash
Accounts receivable.
55,000
62,500
Inventory
Total current assets
180,900
190, 150
Property, plant, and equipment
186,000
175,000
62,000
43,750
Less accumulated depreciation
Net property, plant, and equipment
Total assets
124,000
131,250
$ 304,900
$ 321,400
Accounts payable
$ 40,000
31, 200
$ 71,200
36,700
Income taxes payable
Bonds payable
75,000
62,500
Common stock
87,500
75,000
Retained earnings
71,200
76,000
Total liabilities and stockholders' equity $ 304,900
$ 321,400
During the year, Ravenna paid a $7,500 cash dividend and it sold a piece of equipment for $3,750 that had originally cost
$7,800 and had accumulated depreciation of $5,200. The company did not retire any bonds or repurchase any of its own
common stock during the year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4069fa52-b27a-46d1-ae2b-57cc56c25309%2F343af159-4301-4f19-9643-3a57d0fe86fc%2Fvdn1cdh_processed.png&w=3840&q=75)
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