The following information is taken from Jennifer Corporation's financial statements: December 31 2021 2020 Cash $ 73,080 $ 31,320 Accounts receivable 118,320 92,800 Allowance for doubtful accounts (5,220) (3,596) Inventory 185,600 203,000 Prepaid expenses 8,700 7,888 Land 116,000 69,600 Buildings 341,040 283,040 Accumulated depreciation (37,120) (15,080) Patents 23,200 40,600 $823,600 $709,572 Accounts payable $ 104,400 $ 97,440 Accrued liabilities 62,640 73,080 Bonds payable 145,000 69,600 Common stock 116,000 116,000 Retained earnings―appropriated 92,800 11,600 Retained earnings―unappropriated 320,160 351,132 Treasury stock, at cost (17,400) (9,280) $823,600 $709,572 For 2021 Year Net income $90,828 Depreciation expense 22,040 Amortization of patents 5,800 Cash dividends declared and paid 40,600 Gain or loss on sale of patents none Prepare a statement of cash flows for Jennifer Corporation for the year 2021. (Use 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 information is taken from Jennifer Corporation's financial statements:
| December 31 | ||||||
|
2021
|
2020
|
|||||
| Cash |
$ 73,080
|
$ 31,320
|
||||
|
118,320
|
92,800
|
|||||
| Allowance for doubtful accounts | (5,220) | (3,596) | ||||
| Inventory |
185,600
|
203,000
|
||||
| Prepaid expenses |
8,700
|
7,888
|
||||
| Land |
116,000
|
69,600
|
||||
| Buildings |
341,040
|
283,040
|
||||
| (37,120) | (15,080) | |||||
| Patents |
23,200
|
40,600
|
||||
|
$823,600
|
$709,572
|
|||||
| Accounts payable |
$ 104,400
|
$ 97,440
|
||||
| Accrued liabilities |
62,640
|
73,080
|
||||
| Bonds payable |
145,000
|
69,600
|
||||
| Common stock |
116,000
|
116,000
|
||||
|
92,800
|
11,600
|
|||||
| Retained earnings―unappropriated |
320,160
|
351,132
|
||||
| (17,400) | (9,280) | |||||
|
$823,600
|
$709,572
|
|
For 2021 Year
|
|||
| Net income |
$90,828
|
||
| Depreciation expense |
22,040
|
||
| Amortization of patents |
5,800
|
||
| Cash dividends declared and paid |
40,600
|
||
| Gain or loss on sale of patents |
none
|
Prepare a statement of cash flows for Jennifer Corporation for the year 2021. (Use the indirect method.) (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
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