Net Cash Flow From Operating Activities Verna Company's records provided the following information for 2019: decrease in accounts payable, $4,300 loss on sale of land, $1,400 increase in inventory, $7,300 increase in income taxes payable, $3,000 net income, $67,200 patent amortization expense, $1,000 ordinary loss, $6,200 decrease in deferred taxes payable, $2,900 amortization of discount on bonds payable, $1,200 payment of cash dividends, $28,000 depletion expense, $4,500 decrease in salaries payable, $1,200 decrease in accounts receivable, $3,500 gain on sale of equipment, $6,500 proceeds from issuance of stock, $64,000 ordinary gain, $3,200 depreciation expense, $20,000 amortization of discount on investment in bonds, $1,100 Required Prepare the operating activities section of Verna's 2019 statement of cash flows using the indirect method. Use a minus sign to indicate cash outflows or decreases 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.
Net Cash Flow From Operating Activities
Verna Company's records provided the following information for 2019:
- decrease in accounts payable, $4,300
- loss on sale of land, $1,400
- increase in inventory, $7,300
- increase in income taxes payable, $3,000
- net income, $67,200
- patent amortization expense, $1,000
- ordinary loss, $6,200
- decrease in
deferred taxes payable, $2,900 - amortization of discount on bonds payable, $1,200
- payment of cash dividends, $28,000
- depletion expense, $4,500
- decrease in salaries payable, $1,200
- decrease in accounts receivable, $3,500
- gain on sale of equipment, $6,500
- proceeds from issuance of stock, $64,000
- ordinary gain, $3,200
- depreciation expense, $20,000
- amortization of discount on investment in bonds, $1,100
Required
Prepare the operating activities section of Verna's 2019 statement of cash flows using the indirect method. Use a minus sign to indicate
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
