Auga Company Ltd Comparative Balance Sheet December 31, 2021 and 2020 2021 2020 Increase/(Decrease) Assets Cash 110,000 70,000 ? Accounts Receivable 300,000 325,000 ? Supplies 350,000 280,000 ? Prepaid expenses 35,000 28,000 ? Intangible assets 215,000 215,000 ? Equipment, net 1,200,000 980,000 ? Total Assets 2,210,000 1,898,000 Liabilities Accounts payable 250,000 140,000 ? Accrued liabilities 210,000 215,000 ? Income tax payable 78,000 98,500 ? Long-term notes payable 602,000 725,000 ? Stockholders' Equity Common Stock 410,000 330,000 ? Retained earnings 730,000 450,000 ? Treasury stock (70,000) (60,500) ? Total liabilities and stockholders' equity 2,210,000 1,898,000 Auga Company Ltd Income Statement Year Ended December 31,2021 Revenues and gains: Sales revenue 2,100,000 Gain on sale of Equipment 85,000 Total revenues and gains 2,185,000 Expenses Cost of goods sold 900,000 Depreciation expense 150,000 Other operating expense 350,000 Total expenses 1,400,000 Income before income taxes 785,000 Income tax expense 210,000 Net Income 575,000 Notes Acquisition of Equipment during 2021 540,000 Sale proceeds from sale of Equipment 255,000 Receipt for issuance of notes payable 27,000 Payment for note payable 150,000 Dividend paid 295,000 Book value of equipment sold 170,000 Requirements True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of cash flows? Reconstruct the company’s comparative balance sheet for 2020/2021 using the information in line with your first name initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. Prepare a complete statement of cash flows for 2021 using the indirect method using the information in line with your first name initial.
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.
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Auga Company Ltd |
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Comparative |
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December 31, 2021 and 2020 |
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2021 |
2020 |
Increase/(Decrease) |
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Assets |
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Cash |
110,000 |
70,000 |
? |
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300,000 |
325,000 |
? |
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Supplies |
350,000 |
280,000 |
? |
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Prepaid expenses |
35,000 |
28,000 |
? |
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Intangible assets |
215,000 |
215,000 |
? |
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Equipment, net |
1,200,000 |
980,000 |
? |
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Total Assets |
2,210,000 |
1,898,000 |
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Liabilities |
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Accounts payable |
250,000 |
140,000 |
? |
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Accrued liabilities |
210,000 |
215,000 |
? |
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Income tax payable |
78,000 |
98,500 |
? |
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Long-term notes payable |
602,000 |
725,000 |
? |
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Common Stock |
410,000 |
330,000 |
? |
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730,000 |
450,000 |
? |
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(70,000) |
(60,500) |
? |
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Total liabilities and stockholders' equity |
2,210,000 |
1,898,000 |
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Auga Company Ltd |
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Income Statement |
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Year Ended December 31,2021 |
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Revenues and gains: |
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Sales revenue |
2,100,000 |
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Gain on sale of Equipment |
85,000 |
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Total revenues and gains |
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2,185,000 |
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Expenses |
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Cost of goods sold |
900,000 |
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Depreciation expense |
150,000 |
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Other operating expense |
350,000 |
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Total expenses |
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1,400,000 |
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Income before income taxes |
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785,000 |
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Income tax expense |
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210,000 |
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Net Income |
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575,000 |
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Notes |
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Acquisition of Equipment during 2021 |
540,000 |
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Sale proceeds from sale of Equipment |
255,000 |
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Receipt for issuance of notes payable |
27,000 |
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Payment for note payable |
150,000 |
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Dividend paid |
295,000 |
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Book value of equipment sold |
170,000 |
Requirements
- True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of
cash flows ?
Reconstruct the company’s comparative balance sheet for 2020/2021 using the information in line with your first name initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure.
Prepare a complete statement of cash flows for 2021 using the indirect method using the information in line with your first name initial.
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