Selected data derived from the income statement and balance sheet of National Beverage Co. for a recent year are as follows: Income statement data (in thousands): Net income $149,774 Loss on disposal of property (149) Depreciation expense 13,226 Other items involving noncash expense 837 Balance sheet data (in thousands): Increase in accounts receivable 13,041 Increase in inventory 7,565 Increase in prepaid expenses 10,548 Increase in accounts payable and other current liabilities 17,464 a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method for National Beverage Co. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Enter the amounts in thousands of dollars, as shown above
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.
Selected data derived from the income statement and balance sheet of National Beverage Co. for a recent year are as follows:
| Income statement data (in thousands): | |
| Net income | $149,774 |
| Loss on disposal of property | (149) |
| 13,226 | |
| Other items involving noncash expense | 837 |
| Balance sheet data (in thousands): | |
| Increase in |
13,041 |
| Increase in inventory | 7,565 |
| Increase in prepaid expenses | 10,548 |
| Increase in accounts payable and other current liabilities | 17,464 |
a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method for National Beverage Co. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments. Enter the amounts in thousands of dollars, as shown above.
| National Beverage Co. |
| Cash Flows from Operating Activities |
| (in thousands) |
Cash flows from (used for) operating activities:
....................................................................................... $
Adjustments to reconcile net income to net cash flows from (used for) operating activities:
.............................................................................. $
................................................................................ $
................................................................................ $
Changes in current operating assets and liabilities:
...............................................................................
..............................................................................
.............................................................................
..............................................................................
Net cash flows from operating activities $
b. The company has .......... earnings and .............. net cash flow from operating activities. The increase in accounts receivable indicates a(n) ................ in sales. In addition, the company is using its cash to decrease its accounts payable balance, which indicates that the company is ................... . Overall, National Beverage is doing ................. financially.
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