Vaughn Corporation’s comparative balance sheets are presented below. VAUGHN CORPORATION Comparative Balance Sheets December 31 2022 2021 Cash $14,700 $11,000 Accounts receivable 21,100 23,800 Land 20,000 25,600 Buildings 70,000 70,000 Accumulated depreciation—buildings (15,400) (10,700) Total $110,400 $119,700 Accounts payable $12,300 $31,100 Common stock 74,600 70,800 Retained earnings 23,500 17,800 Total $110,400 $119,700 Additional information: 1. Net income was $23,000. Dividends declared and paid were $17,300. 2. No noncash investing and financing activities occurred during 2022. 3. The land was sold for cash of $4,700. (a) Prepare a statement of cash flows for 2022 using the indirect method. (b) Incorrect answer icon Your answer is incorrect. Compute free cash flow. Free cash flow $enter the free cash flow in dollars
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.
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VAUGHN CORPORATION
Comparative Balance Sheets December 31 |
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|---|---|---|---|---|---|---|
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2022
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2021
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Cash
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$14,700
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$11,000
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21,100
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23,800
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Land
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20,000
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25,600
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Buildings
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70,000
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70,000
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(15,400)
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(10,700)
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Total
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$110,400
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$119,700
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Accounts payable
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$12,300
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$31,100
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Common stock
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74,600
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70,800
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23,500
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17,800
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Total
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$110,400
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$119,700
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Additional information:
| 1. | Net income was $23,000. Dividends declared and paid were $17,300. | |
| 2. | No noncash investing and financing activities occurred during 2022. | |
| 3. | The land was sold for cash of $4,700. |
(a)
(b)
| Free cash flow |
$enter the free cash flow in dollars
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