repare a statement of cash flows for 2022 using the indirect method.
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.
Shown below are comparative balance sheets for Novak Company.
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Novak Company
Comparative Balance Sheets December 31 |
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|---|---|---|---|---|---|---|
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Assets
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2022
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2021
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Cash
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$ 122,400
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$ 39,600
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Accounts receivable
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158,400
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136,800
|
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Inventory
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300,600
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340,200
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Land
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144,000
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180,000
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Equipment
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468,000
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360,000
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(118,800
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)
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(57,600
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)
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Total
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$1,074,600
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$999,000
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Liabilities and
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Accounts payable
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$ 70,200
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$ 77,400
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Bonds payable
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270,000
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360,000
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Common stock ($1 par)
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388,800
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313,200
|
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|
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345,600
|
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248,400
|
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Total
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$1,074,600
|
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$999,000
|
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Additional information:
| 1. | Net income for 2022 was $167,400. | |
| 2. | Depreciation expense was $61,200. | |
| 3. | Cash dividends of $70,200 were declared and paid. | |
| 4. | Bonds payable amounting to $90,000 were redeemed for cash $90,000. | |
| 5. | Common stock was issued for $75,600 cash. | |
| 6. | No equipment was sold during 2022. | |
| 7. | Land was sold for its book value. |
Prepare a statement of
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Novak Company
Statement of Cash Flows Choose the accounting period December 31, 2022For the Year Ended December 31, 2022For the Quarter Ended December 31, 2022 |
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Select an opening name for section one Cash at Beginning of PeriodCash at End of PeriodCash Flows from Financing ActivitiesCash Flows from Investing ActivitiesCash Flows from Operating ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Provided by Operating ActivitiesNet Cash used by Financing ActivitiesNet Cash used by Investing ActivitiesNet Cash used by Operating ActivitiesNet Decrease in CashNet Increase in Cash
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Select an item Decrease in Accounts PayableDecrease in Accounts ReceivableDecrease in InventoryDepreciation ExpenseIncrease in Accounts PayableIncrease in Accounts ReceivableIncrease in InventoryIssuance of Common StockNet IncomePayment of Cash DividendsPurchase of EquipmentRedemption of BondsSale of Land
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Adjustments to reconcile net income to
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Select an opening name for subsection Cash at Beginning of PeriodCash at End of PeriodCash Flows from Financing ActivitiesCash Flows from Investing ActivitiesCash Flows from Operating ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Provided by Operating ActivitiesNet Cash used by Financing ActivitiesNet Cash used by Investing ActivitiesNet Cash used by Operating ActivitiesNet Decrease in CashNet Increase in Cash
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Select an item Decrease in Accounts PayableDecrease in Accounts ReceivableDecrease in InventoryDepreciation ExpenseIncrease in Accounts PayableIncrease in Accounts ReceivableIncrease in InventoryIssuance of Common StockNet IncomePayment of Cash DividendsPurchase of EquipmentRedemption of BondsSale of Land
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$Enter a dollar amount
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Select an item
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Enter a dollar amount
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Select an item
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Enter a total amount for section one
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Select an opening name for section two
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Select an item Decrease in Accounts PayableDecrease in Accounts ReceivableDecrease in InventoryDepreciation ExpenseIncrease in Accounts PayableIncrease in Accounts ReceivableIncrease in InventoryIssuance of Common StockNet IncomePayment of Cash DividendsPurchase of EquipmentRedemption of BondsSale of Land
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Enter a dollar amount
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Select an item
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Enter a dollar amount
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Select a closing name for section two
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Enter a total amount for section two
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Select an opening name for section three
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Select an item Decrease in Accounts PayableDecrease in Accounts ReceivableDecrease in InventoryDepreciation ExpenseIncrease in Accounts PayableIncrease in Accounts ReceivableIncrease in InventoryIssuance of Common StockNet IncomePayment of Cash DividendsPurchase of EquipmentRedemption of BondsSale of Land
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Enter a dollar amount
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Select an item
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Enter a dollar amount
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Select an item
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Enter a dollar amount
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Select a closing name for section three
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Enter a total amount for section three
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Select an item
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Enter a total amount for three sections
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Select an item
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Enter a dollar amount
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Select a closing name for this statement
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$Enter a total of the two previous amounts
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