Income statement and balance sheet data for Virtual Gaming Systems are provided below. VIRTUAL GAMING SYSTEMS Income Statonents For the years ended December 31 2022 $3, 56e,eee 2,490, eee 1,070,eee 2021 Net sales Cost of goods sold Gross profit Expenses: Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense Total expenses $3,886,e00 1,96e,e0e 1,126,800 965,eee 40, eee 23,ee0 9,eee 1,037,0ee %24 868,eee 32,eee 9,00e 20,000 58,eee 987,000 33,eee $ 139,e00 Net income VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2022 2021 2020 Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long term assets: Investment in bonds $ 216,000 98,eee 148,0ee 15,000 $196,008 91,eee 115,eee 13,000 $154,eee 70,eee 145,000 7,200 115,eee 310,e00 310,080 (124,0ee) $1,072,0e0 115.eee 220,ee6 280,eee (84,eee) $946,000 Land 250,eee 220,000 (52,000) $794, 200 Equipnent Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long term liabilities: Notes payable Stockholders Common stock Retained carnings 161,0ee 12,000 13,e00 $ 76,000 8,eee 20,eee $ 91,e00 4,e00 15,000 458,000 295,000 235,ee0 equity: 310,000 126,000 $1,072.000 310,0e0 237.000 $946,000 31e,000 139,200 $794, 200 Total liabilities and stockholders' equity Problem 12-6A Part 2 2 Calculate the following profitobility ratios for 2021 and 2022: (Round your answers to 1 decimal place.) 2021 2022 Gross profit ratio Relurn on assets Profil margin Ancel lurndver times Limes
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.
![Required Information
Problem 12-6A Use ratios to analyze risk and profitability (LO12-3, 12-4)
(The following information applies to the questions displayed below.]
Income staternent and balance sheet data for Virtual Gaming Systems are provided below.
VIRTUAL GAMING SYSTEMS
Income Statenents
For the years ended December 31
2022
$3,560,e00 $3,886,e00
2,490,eee
1,870, eee
2021
Net sales
Cost of goods sold
Gross profit
Expenses:
Operating expenses
Depreciation expense
Loss on sale of land
Interest expense
Income tax expense
Total expenses
1,960,e0e
1,126,000
965,e0e
40,eee
868,000
32,000
9,000
20,000
58,000
23,eee
9,e00
1,837,00e
987,000
$ 139,000
Net income
%24
33,ee0
VIRTUAL GAMING SYSTEMS
Balance Sheets
December 31
2022
2021
2020
Assets
Current assets:
Cash
Accounts receivable
Inventory
Prepaid rent
Long term assets:
Investment in bonds
$ 216,000
98,e00
148,000
15,000
$196,000
91,000
115,000
13,000
$154,000
70,000
145,000
7,200
Land
Equipment
Less: Accumulated depreciation
115,eee
310,e00
310,000
(124,000)
$1,072,0e0 $946,000
115,000
220,000
280, ee0
(84,000)
250,000
220,000
(52,000)
$794,200
Total assets
Liabilities and Stockholders' Equity
Current liabilitics:
Accounts payable
Interest payable
Income tax payable
Long term liabilitics:
Notes payable
Stockholders equity:
161,0e0
12,e00
13, e00
$ 76,000
8,000
20,000
$ 91,000
4,000
15,000
450,000
295,000
235,e00
310,000
126,ee0
310,000
237.000
$946,000
Common stock
310,000
139,200
$794, 200
Retained carnings
Total liabilities and stockholders' equity
$1,072,000
Problem 12-6A Part 2
2 Calculate the following profitability ratios for 2021 and 2022: (Round your answers to 1 decimal place.)
2021
2022
Gross profit ratio
Relum on assets
Profil margin
EHcel turtiover
times
Limes](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b683749-58e5-4e30-bd6b-95e0226f4526%2Fe0d1fe39-e155-4a04-8a61-1af0c1b287d3%2Fuo2o0es_processed.jpeg&w=3840&q=75)
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