Carla Vista Co. has these comparative balance sheet data: CARLA VISTA CO. Balance Sheets December 31 2022 2021 Cash $ 16,140 $ 32,280 Accounts receivable (net) 75,320 64,560 Inventory 64,560 53,800 Plant assets (net) 215,200 193,680 $371,220 $344,320 Accounts payable $ 53,800 $ 64,560 Mortgage payable (15%) 107,600 107,600 Common stock, $10 par 150,640 129,120 Retained earnings 59,180 43,040 $371,220 $344,320 Additional information for 2022: 1. Net income was $32,500. 2. Sales on account were $392,900. Sales returns and allowances amounted to $27,300. 3. Cost of goods sold was $217,300. 4. Net cash provided by operating activities was $57,200. 5. Capital expenditures were $30,000, and cash dividends were $19,000. Compute the following ratios at December 31, 2022. (Round current ratio and inventory turnover to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8. Use 365 days for calculation.) (a) Current ratio. enter current ratio rounded to 2 decimal places :1 (b) Accounts receivable turnover. enter accounts receivable turnover in times rounded to 1 decimal place times (c) Average collection period. enter average collection period in days rounded to 1 decimal place days (d) Inventory turnover. enter inventory turnover in times rounded to 2 decimal places times (e) Days in inventory. enter days in inventory rounded to 1 decimal place days (f) Free cash flow. $enter free cash flow in dollars rounded to 1 decimal place
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.
Carla Vista Co. has these comparative balance sheet data:
|
CARLA VISTA CO.
Balance Sheets December 31 |
||||
|---|---|---|---|---|
|
2022
|
2021
|
|||
|
Cash
|
$ 16,140
|
$ 32,280
|
||
|
Accounts receivable (net)
|
75,320
|
64,560
|
||
|
Inventory
|
64,560
|
53,800
|
||
|
Plant assets (net)
|
215,200
|
193,680
|
||
|
$371,220
|
$344,320
|
|||
|
Accounts payable
|
$ 53,800
|
$ 64,560
|
||
|
Mortgage payable (15%)
|
107,600
|
107,600
|
||
|
Common stock, $10 par
|
150,640
|
129,120
|
||
|
|
59,180
|
43,040
|
||
|
$371,220
|
$344,320
|
Additional information for 2022:
| 1. | Net income was $32,500. | |
| 2. | Sales on account were $392,900. Sales returns and allowances amounted to $27,300. | |
| 3. | Cost of goods sold was $217,300. | |
| 4. | Net cash provided by operating activities was $57,200. | |
| 5. | Capital expenditures were $30,000, and cash dividends were $19,000. |
Compute the following ratios at December 31, 2022. (Round
| (a) | Current ratio. |
enter current ratio rounded to 2 decimal places
|
:1 | ||
| (b) | Accounts receivable turnover. |
enter accounts receivable turnover in times rounded to 1 decimal place
|
times | ||
| (c) | Average collection period. |
enter average collection period in days rounded to 1 decimal place
|
days | ||
| (d) | Inventory turnover. |
enter inventory turnover in times rounded to 2 decimal places
|
times | ||
| (e) | Days in inventory. |
enter days in inventory rounded to 1 decimal place
|
days | ||
| (f) |
$enter free cash flow in dollars rounded to 1 decimal place
|
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