C. Cash Flow Statement Prepare a Cash Flow Statement for Red Company for the year ended December 31, 2021. Red Company Balance Sheets December 31, ASSETS LIABILITIES AND EQUITY a. b. Cash Accounts receivable Inventory Investments (long-term) C d. Land Equipment Accumulated depreciation e. f. Accounts payable Salaries payable Dividends payable Common stock, $10 par Paid-in capital in excess of par Retained earnings Sales Cost of goods sold Gross profit Operating expenses: Depreciation expense Other operating expenses Total operating expenses Other income: Other information: Gain on sale of long-term investments Income before income tax Income tax expense Net income 2021 $ 186,800 250,000 293,000 0 290,000 735,200 (221,800) $ 1,533,200 Red Company Income Statement Year Ended December 31, 2021 $164,800 13,400 33,200 200,000 640,000 481.800. $ 1,533,200 2020 $ 115,600 247,000 217,800 130,000 0 557,200 (174,800) $ 1,092,800 $ 148,000 12,000 31,400 140,000 400,000 361,400 $ 1,092,800 Equipment was acquired for $78,000. Land was purchased for $290,000. The investments were sold for $190,000. The common stock was issued for $200,000. Cash dividends declared for the year totaled $143,600. $100,000 of equipment was received in exchange for common stock. $ 1,449,400 826.200 603,200 47,000 205.800 252,800 60,000 410,400 146,400 $ 264,000
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.
Step by step
Solved in 2 steps
