Assets Cash Accounts receivable (net) Prepaid insurance Land Equipment Accumulated depreciation Total assets Liabilities and Stockholder's Equity Accounts payable Bonds payable Common stock Retained earnings Total liabilities and stockholders' equity Additional information: 1. 2. 3. 4. 5. 6 Comparative Balance Sheet 2020 $36,000 70,000 25,000 18,000 70,000 (20,000) $199,000 $11,000 27,000 140,000 21,000 $199,000 2019 $31,000 60,000 17,000 40.000 60,000 (13,000) $195,000 $6,000 19,000 115,000 55,000 $195,000 Net loss for 2020 is $20,000. Cash dividends of $14,000 were declared and paid in 2020. Land was sold for cash at a loss of $4,000. This was the only land transaction during the year. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash. $22,000 of bonds were retired during the year at carrying (book) value. Equipment was acquired for common stock The fair value of the stock at the time of the exchange was $25.000
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.
A comparative balance sheet for Halpern Corporation is presented below:
Assets
Liabilities and
Accounts payable Bonds payable Common stock
(20,000 $199,000
$11,000 27,000 140,000 21,000
)
HALPERN CORPORATION Comparative Balance Sheet
2020
2019
$31,000 60,000 17,000 40,000 60,000
(13,000 ) $195,000
$6,000
19,000 115,000 55,000
Cash $36,000 Accounts receivable (net) 70,000 Prepaid insurance 25,000 Land 18,000 Equipment 70,000
Total liabilities and stockholders' equity $199,000 $195,000
Additional information:
-
Net loss for 2020 is $20,000.
-
Cash dividends of $14,000 were declared and paid in 2020.
-
Land was sold for cash at a loss of $4,000. This was the only land transaction during the year.
-
Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash.
-
$22,000 of bonds were retired during the year at carrying (book) value.
-
Equipment was acquired for common stock. The fair value of the stock at the time of the exchange was $25,000.
Prepare a statement of
(Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
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