Statement of Cash Flow Presented below are the consolidated financial statements of The Mann Corporation as of year-end 2012 and 2013. THE MANN CORPORATION Consolidated Balance Sheets As of Year-End ($ thousands) 2013 2012 Assets Current assets Cash $320,000 $200,000 Accounts receivable (net) 792,000 608,000 Inventory 568,000 320,000 Prepaid expenses 80,000 80,000 Total current assets 1,760,000 1,208,000 Investments in affiliate companies 80,000 - Property and equipment 1,048,000 640,000 Less: Accumulated depreciation (88,000) (64,000) Property & equipment (net) 960,000 576,000 Total assets $2,800,000 $1,784,000 Liabilities & Shareholders' Equity Current liabilities Accounts payable $456,000 $400,000 Accrued expenses payable 160,000 176,000 Dividends payable 56,000 - Total current liabilities 672,000 576,000 Note payable-due in ten years 400,000 - Total liabilities 1,072,000 576,000 Shareholders' equity Common stock, $5 par value 240,000 160,000 Additional paid-in-capital 960,000 928,000 Retained earnings 528,000 120,000 Total shareholders' equity 1,728,000 1,208,000 Total liabilities & shareholders' equity $2,800,000 $1,784,000 THE MANN CORPORATION Consolidated Income Statement For Year Ended ($ thousands) 2013 2012 Sales $13,440,000 $9,600,000 Cost of goods sold 11,200,000 8,320,000 Gross margin 2,240,000 1,280,000 Selling & administrative expenses 1,544,000 838,400 Depreciation expense 24,000 16,000 Income tax expense 192,000 121,600 Net income $480,000 $304,000 Required Using the above financial data, prepare the statement of cash flow for 2013 using the indirect method. Use a negative sign with answers to indicate a decrease in cash
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.
Statement of Cash Flow
Presented below are the consolidated financial statements of The Mann Corporation as of year-end 2012 and 2013.
| THE MANN CORPORATION Consolidated Balance Sheets |
||
|---|---|---|
| As of Year-End ($ thousands) | 2013 | 2012 |
| Assets | ||
| Current assets | ||
| Cash | $320,000 | $200,000 |
| Accounts receivable (net) | 792,000 | 608,000 |
| Inventory | 568,000 | 320,000 |
| Prepaid expenses | 80,000 | 80,000 |
| Total current assets | 1,760,000 | 1,208,000 |
| Investments in affiliate companies | 80,000 | - |
| Property and equipment | 1,048,000 | 640,000 |
| Less: |
(88,000) | (64,000) |
| Property & equipment (net) | 960,000 | 576,000 |
| Total assets | $2,800,000 | $1,784,000 |
| Liabilities & Shareholders' Equity | ||
| Current liabilities | ||
| Accounts payable | $456,000 | $400,000 |
| Accrued expenses payable | 160,000 | 176,000 |
| Dividends payable | 56,000 | - |
| Total current liabilities | 672,000 | 576,000 |
| Note payable-due in ten years | 400,000 | - |
| Total liabilities | 1,072,000 | 576,000 |
| Shareholders' equity | ||
| Common stock, $5 par value | 240,000 | 160,000 |
| Additional paid-in-capital | 960,000 | 928,000 |
| 528,000 | 120,000 | |
| Total shareholders' equity | 1,728,000 | 1,208,000 |
| Total liabilities & shareholders' equity | $2,800,000 | $1,784,000 |
| THE MANN CORPORATION Consolidated Income Statement |
||
|---|---|---|
| For Year Ended ($ thousands) | 2013 | 2012 |
| Sales | $13,440,000 | $9,600,000 |
| Cost of goods sold | 11,200,000 | 8,320,000 |
| Gross margin | 2,240,000 | 1,280,000 |
| Selling & administrative expenses | 1,544,000 | 838,400 |
| Depreciation expense | 24,000 | 16,000 |
| Income tax expense | 192,000 | 121,600 |
| Net income | $480,000 | $304,000 |
Required
Using the above financial data, prepare the statement of cash flow for 2013 using the indirect method.
Use a negative sign with answers to indicate a decrease in cash.
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