The following are Concord Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020. COMPARATIVE BALANCE SHEETS 2020 2019 Increase (Decrease) Cash $813,400 $705,900 $107,500 Accounts receivable 1,123,400 1,156,600 (33,200 ) Inventory 1,863,500 1,731,800 131,700 Property, plant, and equipment 3,302,300 2,988,100 314,200 Accumulated depreciation (1,162,900 ) (1,033,700 ) (129,200 ) Investment in Myers Co. 307,100 276,600 30,500 Loan receivable 252,200 — 252,200 Total assets $6,499,000 $5,825,300 $673,700 Accounts payable $1,015,600 $946,000 $69,600 Income taxes payable 30,100 49,800 (19,700 ) Dividends payable 79,200 100,900 (21,700 ) Lease liabililty 373,600 — 373,600 Common stock, $1 par 500,000 500,000 — Paid-in capital in excess of par—common stock 1,513,500 1,513,500 — Retained earnings 2,987,000 2,715,100 271,900 Total liabilities and stockholders’ equity $6,499,000 $5,825,300 $673,700 Additional information: 1. On December 31, 2019, Concord acquired 25% of Myers Co.’s common stock for $276,600. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,106,400. Myers reported income of $122,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year. 2. During 2020, Concord loaned $273,800 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $21,600, plus interest at 10%, on December 31, 2020. 3. On January 2, 2020, Concord sold equipment costing $59,400, with a carrying amount of $37,900, for $40,400 cash. 4. On December 31, 2020, Concord entered into a capital lease for an office building. The present value of the annual rental payments is $373,600, which equals the fair value of the building. Concord made the first rental payment of $59,400 when due on January 2, 2021. 5. Net income for 2020 was $351,100. 6. Concord declared and paid the following cash dividends for 2020 and 2019. 2020 2019 Declared December 15, 2020 December 15, 2019 Paid February 28, 2021 February 28, 2020 Amount $79,200 $100,900 Prepare a statement of cash flows for Concord Corp. for the year ended December 31, 2020, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
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 following are Concord Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020.
|
COMPARATIVE BALANCE SHEETS
|
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
2020
|
2019
|
Increase
(Decrease) |
|||||||
|
Cash
|
$813,400
|
$705,900
|
$107,500
|
||||||
|
Accounts receivable
|
1,123,400
|
1,156,600
|
(33,200
|
)
|
|||||
|
Inventory
|
1,863,500
|
1,731,800
|
131,700
|
||||||
|
Property, plant, and equipment
|
3,302,300
|
2,988,100
|
314,200
|
||||||
|
|
(1,162,900
|
)
|
(1,033,700
|
)
|
(129,200
|
)
|
|||
|
Investment in Myers Co.
|
307,100
|
276,600
|
30,500
|
||||||
|
Loan receivable
|
252,200
|
—
|
252,200
|
||||||
|
Total assets
|
$6,499,000
|
$5,825,300
|
$673,700
|
||||||
|
|
|||||||||
|
Accounts payable
|
$1,015,600
|
$946,000
|
$69,600
|
||||||
|
Income taxes payable
|
30,100
|
49,800
|
(19,700
|
)
|
|||||
|
Dividends payable
|
79,200
|
100,900
|
(21,700
|
)
|
|||||
|
Lease liabililty
|
373,600
|
—
|
373,600
|
||||||
|
Common stock, $1 par
|
500,000
|
500,000
|
—
|
||||||
|
Paid-in capital in excess of par—common stock
|
1,513,500
|
1,513,500
|
—
|
||||||
|
|
2,987,000
|
2,715,100
|
271,900
|
||||||
|
Total liabilities and
|
$6,499,000
|
$5,825,300
|
$673,700
|
Additional information:
| 1. | On December 31, 2019, Concord acquired 25% of Myers Co.’s common stock for $276,600. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,106,400. Myers reported income of $122,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year. | |
| 2. | During 2020, Concord loaned $273,800 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $21,600, plus interest at 10%, on December 31, 2020. | |
| 3. | On January 2, 2020, Concord sold equipment costing $59,400, with a carrying amount of $37,900, for $40,400 cash. | |
| 4. | On December 31, 2020, Concord entered into a capital lease for an office building. The present value of the annual rental payments is $373,600, which equals the fair value of the building. Concord made the first rental payment of $59,400 when due on January 2, 2021. | |
| 5. | Net income for 2020 was $351,100. | |
| 6. | Concord declared and paid the following cash dividends for 2020 and 2019. |
|
2020
|
2019
|
|||
|---|---|---|---|---|
|
Declared
|
December 15, 2020 | December 15, 2019 | ||
|
Paid
|
February 28, 2021 | February 28, 2020 | ||
|
Amount
|
$79,200 | $100,900 |
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