The following balance sheet items are available from Carnell Inc. as of December 31, 2012: 2011 2012 (in millions) 35,035 85,065 25,000 75,500 Accounts payable Accounts receivable 50,000 Bonds payable, due 12/31/2016 Buildings, net Capital stock, 5 par 125,000 240,000 300,000 80,000 25,635 24,000 16,465 7,550 100,000 15,000 24,000 12,250 Cash Equipment, net Income taxes payable Interest payable 13,755 Inventory 25,650 27,270 300,000 125,000 100,000 200,000 100,000 Land Long-term investments Notes payable, due 6/30/2013 Supplies Additional paid-in capital 100,000 13,500 12,500 200,000 190,000 Patents 6,000 6,000 Prepaid rent Retained earnings Salaries payable 10,150 146,295 12,275 306,135 35,500 33,560 Required a. Prepare a comparative, classified balance sheet for Carnell Inc. b. Perform horizontal and vertical analyses and interpret the results. Round percentages to one decimal point (i.e., 10.1%). c. Assume the same information above except that in 2012, Bonds payable is 0 while Retained earnings is 271,295. Does this new information change any interpretations previously made?
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.
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