Exercise 15-2 (Algo) Net Cash Provided by Operating Activities [LO15-2] For the year just completed, Hanna Company had net income of $59,500. Balances in the company's current asset and current liability accounts at the beginning and end of the year were as follows: Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Current liabilities: Accounts payable Accrued liabilities Income taxes payable December 31 Beginning of Year End of Year $ 58,000 $ 164,000 $ 436,000 $ 12,000 $ 366,000 $ 8,500 $ 34,000 $ 81,000 $ 198,000 $ 355,000 $ 14,000 $ 382,000 $ 12,000 $ 30,000 The Accumulated Depreciation account had total credits of $40,000 during the year. Hanna Company did not record any gains or losses during the year. Required: Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)
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.
![Exercise 15-2 (Algo) Net Cash Provided by Operating Activities [LO15-2]
For the year just completed, Hanna Company had net income of $59,500. Balances in the company's current asset and current liability
accounts at the beginning and end of the year were as follows:
Current assets:
Cash and cash equivalents
Accounts receivable
Inventory
Prepaid expenses
Current liabilities:
Accounts payable
Accrued liabilities
Income taxes payable
December 31
Beginning of
Year
End of Year:
$ 58,000
$164,000
$ 436,000
$ 12,000
$366,000
$ 8,500
$ 34,000
$ 81,000
$ 198,000
$ 355,000
$ 14,000
$ 382,000
$ 12,000.
$ 30,000
The Accumulated Depreciation account had total credits of $40,000 during the year. Hanna Company did not record any gains or
losses during the year.
Required:
Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash
outflows as negative amounts.)
Hanna Company
Statement of Cash Flows-Indirect Method (partial)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F912e22b9-5b1c-4ba6-9f8a-1faebaa832c1%2F6fd11473-5f17-41be-bf3b-d42f53739ad4%2F3j13ugv_processed.jpeg&w=3840&q=75)
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