Use the following information from Eiffel Company’s financial statements. 2018 Income Statement Balance Sheets Sales $309,000 Cost of Goods Sold (145,000) Operating Expenses, other than Depreciation Expense (27,000) Depreciation expense (16,000) Gain on Sale of Plant Assets 16,000 Net Income $137,000 Dec. 31,2018 Accounts Receivable $45,300 Inventory 1,600 Accounts Payable 22,500 Accured Liabilities 900 Dec. 31, 2017 Accounts Receivable $22,250 Inventory 1,800 Accounts Payable 22,250 Accured Liabilities 1,150 Prepare the operating activities section of the statement of cash flows (indirect method) for the year 2018. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments. Eiffel Company Statement of Cash Flows (Indirect Method) For the Year Ended December 31, 2018 Operating Activities: $fill in the blank 2 Adjustments to Reconcile Net Income to Net Cash Flow from Operating Activities: fill in the blank 4 fill in the blank 6 Changes in Current Assets and Liabilities: fill in the blank 8 fill in the blank 10 fill in the blank 12 fill in the blank 14 Net Cash Flow from Operating Activities $fill in the blank 15
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.
Use the following information from Eiffel Company’s financial statements.
| 2018 Income Statement |
Balance Sheets |
||
| Sales | $309,000 | ||
| Cost of Goods Sold | (145,000) | ||
| Operating Expenses, other than Depreciation Expense |
(27,000) | ||
| Depreciation expense | (16,000) | ||
| Gain on Sale of Plant Assets | 16,000 | ||
| Net Income | $137,000 | ||
| Dec. 31,2018 | |||
| Accounts Receivable | $45,300 | ||
| Inventory | 1,600 | ||
| Accounts Payable | 22,500 | ||
| Accured Liabilities | 900 | ||
| Dec. 31, 2017 | |||
| Accounts Receivable | $22,250 | ||
| Inventory | 1,800 | ||
| Accounts Payable | 22,250 | ||
| Accured Liabilities | 1,150 |
Prepare the operating activities section of the statement of
| Eiffel Company | |
| Statement of Cash Flows (Indirect Method) | |
| For the Year Ended December 31, 2018 | |
| Operating Activities: | |
| $fill in the blank 2 | |
| Adjustments to Reconcile Net Income to Net Cash Flow from Operating Activities: | |
| fill in the blank 4 | |
| fill in the blank 6 | |
| Changes in Current Assets and Liabilities: | |
| fill in the blank 8 | |
| fill in the blank 10 | |
| fill in the blank 12 | |
| fill in the blank 14 | |
| Net Cash Flow from Operating Activities | $fill in the blank 15 |
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