The Income Statement and additional data of Crawford Properties, Inc., follows: CRAWFORD PROPERTIES Inc. Income Statement For Year Ended June 30, 20X6 Revenues: Sales revenue $237,000 Expenses: Cost of goods sold $103,000 Salary expense 58,000 Depreciation expense 29,000 Income taxes expense 9,000 199,000 Net Income $38,000 Additional data: a) Acquisition of plant assets is $116,000. Of this amount $101,000 is paid in cash and $15,000 by signing a note payable. b) Proceeds from sale of land total $24,000 c) Proceeds from issuance of common stock total $30,000 d) Payment of long-term note payable is $15,000 e) Payment of dividends is $11,000 f) From the balance sheet 30/6/X 6 30/6/X 5 Current Assets: Cash & cash equivalents $27,000 $20,000 Accounts receivable 43,000 58,000 Inventories 92,000 85,000 Current Liabilities: Accounts payable $35,000 $22,000 Accrued liabilities 13,000 21,000 Required: Prepare Crawford Properties, Inc.’s statement of cash flows for the year ended June 30, 20X6, using the indirect method.
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.
The Income Statement and additional data of Crawford Properties, Inc., follows:
CRAWFORD PROPERTIES Inc.
Income Statement
For Year Ended June 30, 20X6
Revenues:
Sales revenue $237,000
Expenses:
Cost of goods sold $103,000
Salary expense 58,000
Depreciation expense 29,000
Income taxes expense 9,000 199,000
Net Income $38,000
Additional data:
a) Acquisition of plant assets is $116,000. Of this amount $101,000 is paid in cash and
$15,000 by signing a note payable.
b) Proceeds from sale of land total $24,000
c) Proceeds from issuance of common stock total $30,000
d) Payment of long-term note payable is $15,000
e) Payment of dividends is $11,000
f) From the balance sheet
30/6/X 6 30/6/X 5
Current Assets:
Cash & cash equivalents $27,000 $20,000
Inventories 92,000 85,000
Current Liabilities:
Accounts payable $35,000 $22,000
Accrued liabilities 13,000 21,000
Required:
Prepare Crawford Properties, Inc.’s statement of
June 30, 20X6, using the indirect method.
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