Suppose the following data are derived from the 2022 financial statements of Southwest Airlines. (All dollars are in millions.) Southwest has a December 31 year-end. $1,370 Cash balance, January 1, 2022 Cash paid for repayment of debt 123 Cash received from issuance of common stock 130 Cash received from issuance of long-term debt Cash received from customers 490 9,860 Cash paid for property and equipment Cash paid for dividends Cash paid for repurchase of common stock Cash paid for goods and services 1,540 15 1,050 6,920 (a) After analyzing the data, prepare a statement of cash flows for Southwest Airlines for the year ended December 31, 2022. (Show amounts that decrease cash flow either with a negative sign preceding the number e.g. -15,000 or in parentheses e.g. (15,000). Enter amounts in millions, e.g. 45,000,000 would be entered as 45.) (a) After analyzing the data, prepare a statement of cash flows for Southwest Airlines for the year ended December 31, 2022. (Show amounts that decrease cash flow either with a negative sign preceding the number e.g. -15,000 or in parentheses e.g. (15,000). Enter amounts in millions, e.g. 45,000,000 would be entered as 45.) SOUTHWEST AIRLINES Statement of Cash Flows (in millions)
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.
Suppose the following data are derived from the 2022 financial statements of Southwest Airlines. (All dollars are in millions.) Southwest has a December 31 year-end.
| Cash balance, January 1, 2022 | $1,370 | |
| Cash paid for repayment of debt | 123 | |
| Cash received from issuance of common stock | 130 | |
| Cash received from issuance of long-term debt | 490 | |
| Cash received from customers | 9,860 | |
| Cash paid for property and equipment | 1,540 | |
| Cash paid for dividends | 15 | |
| Cash paid for repurchase of common stock | 1,050 | |
| Cash paid for goods and services | 6,920 |
(a)
After analyzing the data, prepare a statement of cash flows for Southwest Airlines for the year ended December 31, 2022. (Show amounts that decrease cash flow either with a negative sign preceding the number e.g. -15,000 or in parentheses e.g. (15,000). Enter amounts in millions, e.g. 45,000,000 would be entered as 45.)
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