The comparative statements of Waterway Company are presented here. Waterway Company Income Statements For the Years Ended December 31 2022 2021 Net sales $1,813,300 $1,753,100 Cost of goods sold 1,008,900 983,000 Gross profit 804,400 770,100 Selling and administrative expenses 516,800 477,800 Income from operations 287,600 292,300 Other expenses and losses Interest expense 18,900 14,800 Income before income taxes 268,700 277,500 Income tax expense 78,224 77,700 Net income $ 190,476 $ 199,800 Waterway Company Balance Sheets December 31 Assets 2022 2021 Current assets Cash $60,200 $64,500 Debt investments (short-term) 70,600 49,200 Accounts receivable (net) 117,800 102,700 Inventory 123,600 114,700 Total current assets 372,200 331,100 Plant assets (net) 602,200 517,900 Total assets $974,400 $849,000 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $159,200 $145,200 Income taxes payable 42,400 41,500 Total current liabilities 201,600 186,700 Bonds payable 220,000 200,000 Total liabilities 421,600 386,700 Stockholders’ equity Common stock ($5 par) 275,300 301,900 Retained earnings 277,500 160,400 Total stockholders’ equity 552,800 462,300 Total liabilities and stockholders’ equity $974,400 $849,000
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.
The comparative statements of Waterway Company are presented here.
Waterway Company
Income Statements
For the Years Ended December 31
2022
2021
Net sales
$1,813,300 $1,753,100
Cost of goods sold
1,008,900 983,000
Gross profit
804,400 770,100
Selling and administrative expenses
516,800 477,800
Income from operations
287,600 292,300
Other expenses and losses
Interest expense
18,900 14,800
Income before income taxes
268,700 277,500
Income tax expense
78,224 77,700
Net income
$ 190,476 $ 199,800
Waterway Company
Balance Sheets
December 31
Assets
2022
2021
Current assets
Cash
$60,200 $64,500
Debt investments (short-term)
70,600 49,200
Accounts receivable (net)
117,800 102,700
Inventory
123,600 114,700
Total current assets
372,200 331,100
Plant assets (net)
602,200 517,900
Total assets
$974,400 $849,000
Liabilities and
Current liabilities
Accounts payable
$159,200 $145,200
Income taxes payable
42,400 41,500
Total current liabilities
201,600 186,700
Bonds payable
220,000 200,000
Total liabilities
421,600 386,700
Stockholders’ equity
Common stock ($5 par)
275,300 301,900
Retained earnings
277,500 160,400
Total stockholders’ equity
552,800 462,300
Total liabilities and stockholders’ equity
$974,400 $849,000
All sales were on credit. Net cash provided by operating activities for 2022 was $231,000. Capital expenditures were $147,000, and cash dividends paid were $73,376.
Compute the following ratios for 2022. (Round Earnings per share,
(a)
Current ratio
enter the ratio rounded to 2 decimal places
:1
(b)
Accounts receivable turnover
enter a number of times rounded to 1 decimal place
times
(c)
Average collection period
enter a number of days rounded to 1 decimal place
days
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