Balance Sheet January 1, 2019 Assets Current assets: Cash Accounts receivable Inventories Prepaid items Total current assets $ 1,900 5,100 13,900 1,300 $22,200 Property, plant, and equipment: Land Buildings Equipment Less: Accumulated depreciation Total property, plant, and equipment $12,000 $60,000 20,000 $ 80,000 (29,000) 51,000 $63,000 $ 7,100 $92,300 Patents (net) Total Assets Liabilities Current liabilities: Accounts payable Income taxes payable Miscellaneous payables Total current liabilities $ 5,500 4,100 1,200 $10,800 Long-term liabilities: 10% bonds payable (due 12/31/2025) Less: Discount on bonds payable Total liabilities Shareholders' Equity Preferred stock, $100 par Additional paid-in capital on preferred stock Common stock, $10 par Additional paid-in capital on common stock Retained earnings Total shareholders' equity Total Liabilities and Shareholders' Equity $ 15,000 (1,000) 14,000 $24,800 $ 17,000 1,500 $14,000 11,200 $18,500 25,200 23,800 $67,500 $92,300 Statement of Cash Flows For Year Ended December 31, 2019 Operating Activities: Net income $ 10,000 Adjustments for differences between income flows and cash flows from operating activities: Add: Depreciation expense Patent amortization expense Loss on sale of land 5,100 600 400 1,100 3,010 190 200 Decrease in accounts receivable (net) Decrease in inventories Increase in income taxes payable Increase in miscellaneous payables Bond discount amortization Less: Gain on sale of equipment Gain on sale of patent Increase in prepaid items Decrease in accounts payable Net cash provided by operating activities 100 (180) (1,100) (120j (400) $ 18,900 Investing Activities: Purchase of building by issuance of mortgage and cash Less: Issuance of mortgage Payment for purchase of building Proceeds from sale of land Proceeds from sale of equipment Proceeds from sale of patent Net cash used for investing octivities $143,000) 20,000 $123,000) 2,800 500 2,100 (17,600) Financing Activities: Proceeds from issuance of common stock (150 shares) Payment of dividends Net cash used for financing activities Net decrease in cash (see Schedule 1) $ 3,000 _ (5,000) (2,000) Cash, January 1, 2019 1,900 Š 1,200 Cash, December 31, 2019 Schedule 1: Investing and Financing Activities Not Affecting Cash Investing Activities: Acquisition of land by issuance of preferred stock (40 shares) Financing Activities: Issuance of preferred stock to acquire land $(4,800) 4,800
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.
Prepare Ending Balance Sheet On December 31, 2019, a fire destroyed a significant portion of Richey Company's accounting records. Only the
January 1, 2019, balance sheet, the statement of cash flows for 2019, and several additional documents were saved as follows: (attached)
The remaining financial documents reveal the following additional data:
. The new building was acquired on December 31, 2019. The related
mortgage requires equal annual repayments of the principal over a 5-year period beginning December 31, 2021.
. The company issued a stock dividend of 200 shares of common
stock on December 14, 2019. On the date of declaration, the stock
was selling for $18 per share.
. The equipment that was sold had an original cost of $1,900.
Required:
Next Level Prepare a December 31, 2019, balance sheet for Richey.
Include supporting calculations.
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