An entity presented the following comparative financial information: 2018 2017 Property, plant and equipment 2,190,000 1,440,000 Accumulated depreciation 450,000 270,000 Long-term investments 225,000 - Prepaid expenses 351,000 315,000 Merchandise inventory 1,950,000 1,260,000 Accounts receivable, net of allowance 1,560,000 1,080,000 Cash 690,000 640,000 Share capital-ordinary 3,000,000 2,400,000 Retained earnings 906,000 688,000 Long-term note payable 1,275,000 1,095,000 Accounts payable 309,000 282,000 Dividend payable 201,000 - Accrued expenses 825,000 - 2018 2017 Net credit sales 7,020,000 3,753,000 Cost of goods sold (3,915,000) (1,881,000) Gross profit 3,105,000 1,872,000 Expenses, including income tax (2,586,000) (1,374,000) Net income 519,000 498,000 Accounts receivable and accounts payable relate to merchandise for sale in the normal course of business. The allowance for bad debts was the same at the end of 2018 and 2017 and no receivables were charged against the allowance. Accounts payable are recorded net of any discount and are always paid within the discount period. The proceeds from the note payable were used to finance the acquisition of property, plant and equipment. Ordinary shares were sold to provide additional working capital. 1. What amount should be reported as net cash provided by operating activities in 2018? 2. What amount should be reported as net cash used in investing activities in 2018? 3. What amount should be reported as net cash provided by financing activities in 2018?
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 FLOWS
An entity presented the following comparative financial information:
|
|
2018 |
2017
|
|
|
Property, plant and equipment |
2,190,000 |
1,440,000 |
|
|
|
450,000 |
270,000 |
|
|
Long-term investments |
225,000 |
- |
|
|
Prepaid expenses |
351,000 |
315,000 |
|
|
Merchandise inventory |
1,950,000 |
1,260,000 |
|
|
Accounts receivable, net of allowance |
1,560,000 |
1,080,000 |
|
|
Cash |
690,000 |
640,000 |
|
|
Share capital-ordinary |
3,000,000 |
2,400,000 |
|
|
Retained earnings |
906,000 |
688,000 |
|
|
Long-term note payable |
1,275,000 |
1,095,000 |
|
|
Accounts payable |
309,000 |
282,000 |
|
|
Dividend payable |
201,000 |
- |
|
|
Accrued expenses |
825,000 |
- |
|
|
|
2018 |
2017
|
|
|
|
Net credit sales |
7,020,000 |
3,753,000 |
|
|
|
Cost of goods sold |
(3,915,000) |
(1,881,000) |
||
|
Gross profit |
3,105,000 |
1,872,000 |
|
|
|
Expenses, including income tax |
(2,586,000) |
(1,374,000) |
||
|
Net income |
519,000 |
498,000 |
|
|
Accounts receivable and accounts payable relate to merchandise for sale in the normal course of business. The allowance for
Accounts payable are recorded net of any discount and are always paid within the discount period.
The proceeds from the note payable were used to finance the acquisition of property, plant and equipment. Ordinary shares were sold to provide additional
1. What amount should be reported as net cash provided by operating activities in 2018?
2. What amount should be reported as net cash used in investing activities in 2018?
3. What amount should be reported as net cash provided by financing activities in 2018?
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