The 2020 comparative balance sheet and 2020 income statement of Maple Group Ltd, have just been prepare and presented to the owners by the company’s Accountant. Upon close examination of the financial information received, it was discovered that some figures in the balance sheet were erroneously omitted due to an oversight by the accountant who is not available to fix the problem due to his unavoidable absence from work. In addition, the owners were concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners. Financial info to be used: Maple Group Ltd Comparative Balance Sheet December 31, 2020 and 2019 2020 2019 Increase/(Decrease) Assets Cash and cash equivalent ? 31,500 (10,000) Accounts Receivable ? 87,500 ? Inventories 97,100 ? ? Fixed Assets, net 142,300 ? 32,000 Total Assets 302,900 323,000 (20,100) Liabilities Accounts payable 25,600 26,600 ? Accrued liabilities 24,000 ? 1,200 Long-term notes payable 58,200 ? (20,000) Stockholders' Equity: Common Stock ? 131,400 ? Retained earnings 54,800 64,000 (9,200) Total liabilities and stockholders' equity 302,900 323,000 (20,100) - - - Maple Group Ltd Income Statement Year Ended December 31,2020 Revenues and gains: Sales revenue 370,000 Interest revenue 11,800 Total revenues and gains 381,800 Expenses Cost of goods sold 205,500 Depreciation expense 15,500 Other operating expense 126,000 Interest expense 24,300 Total expenses 371,300 Income before income taxes 10,500 Income tax expense 16,300 Net Loss (5,800) Notes Acquisition of fixed asset during 2020 47,500 Sale proceed from sale of plant asset - Receipt for issuance of notes payable - Payment for note payable 20,000 Dividend paid 3,400 Book value of equipment sold - Requirements How can the owners use the cash flow information or what can the statement of cash flows helps the owners to do? Reconstruct the company’s comparative balance sheet for 2019/2020 using the information in line with your first name initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. Prepare a complete statement of cash flows for 2020 using the indirect method using the information in line with your first name initial.
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.
The 2020 comparative balance sheet and 2020 income statement of Maple Group Ltd, have just been prepare and presented to the owners by the company’s Accountant. Upon close examination of the financial information received, it was discovered that some figures in the balance sheet were erroneously omitted due to an oversight by the accountant who is not available to fix the problem due to his unavoidable absence from work. In addition, the owners were concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the owners.
Financial info to be used:
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Maple Group Ltd |
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Comparative Balance Sheet |
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December 31, 2020 and 2019 |
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2020 |
2019 |
Increase/(Decrease) |
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Assets |
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|
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Cash and cash equivalent |
? |
31,500 |
(10,000) |
|
|
? |
87,500 |
? |
|
Inventories |
97,100 |
? |
? |
|
Fixed Assets, net |
142,300 |
? |
32,000 |
|
Total Assets |
302,900 |
323,000 |
(20,100) |
|
Liabilities |
|
|
|
|
Accounts payable |
25,600 |
26,600 |
? |
|
Accrued liabilities |
24,000 |
? |
1,200 |
|
Long-term notes payable |
58,200 |
? |
(20,000) |
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|
|
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Common Stock |
? |
131,400 |
? |
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|
54,800 |
64,000 |
(9,200) |
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Total liabilities and stockholders' equity |
302,900 |
323,000 |
(20,100) |
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- |
- |
- |
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Maple Group Ltd |
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Income Statement |
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Year Ended December 31,2020 |
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Revenues and gains: |
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Sales revenue |
370,000 |
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Interest revenue |
11,800 |
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Total revenues and gains |
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381,800 |
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Expenses |
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Cost of goods sold |
205,500 |
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15,500 |
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Other operating expense |
126,000 |
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Interest expense |
24,300 |
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Total expenses |
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371,300 |
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Income before income taxes |
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10,500 |
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Income tax expense |
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16,300 |
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Net Loss |
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(5,800) |
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Notes |
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Acquisition of fixed asset during 2020 |
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47,500 |
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Sale proceed from sale of plant asset |
|
- |
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Receipt for issuance of notes payable |
|
- |
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Payment for note payable |
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20,000 |
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Dividend paid |
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3,400 |
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Book value of equipment sold |
- |
Requirements
- How can the owners use the cash flow information or what can the statement of cash flows helps the owners to do?
- Reconstruct the company’s comparative balance sheet for 2019/2020 using the information in line with your first name initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure.
- Prepare a complete statement of cash flows for 2020 using the indirect method using the information in line with your first name initial.
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