tree Corporation at December 31, 2020. Account Debit (Credit) Cash 200,000 Accounts Receivable 540,000 Note Receivable 40,000 Allowance for Doubtful Accounts (9,000) Merchandise Inventory, Beginning 270,000 Unexpired Insurance 24,000 Furniture and Equipment 690,000 Accumulated Depreciation (75,000) Accounts Payable (54,000) Common Shares (220,000) Retained Earnings, Beginning (325,000) Sales (2,050,000) Purchases 640,000 Salaries Expense 265,000 Rent Expense 64,000 Total - At the end of the year, the following issues were noted: The insurance contract was dated from March 1, 2020 – September 30, 202 20,000 preferred shares were issued for $50 / share. The shares pay a $1.50/share cumulative dividend. Estimated bad debts are 1 percent of gross sales. Depreciation on furniture and equipment is 10% per year. Dividends of $30,000 were declared and paid to common shareholders on December 20. Payment will be made in January. An inventory count on December 31, 2020 indicated that the total inventory on hand was $590,000. Interest of 9% is receivable on the note on January 1 each year. The note is due to mature on January 1, 2025. Accrued salaries at December 31, $ 31,000 were not recorded. Required: Identify and prepare all required journal entries. (This includes all adjusting entries as well as any correcting entries) Include all calculations, where applicable. Prepare the following statements A) Statement of Retained Earnings B) Balance Sheet
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.
tree Corporation at December 31, 2020.
|
Account |
Debit (Credit) |
|
Cash |
200,000 |
|
Accounts Receivable |
540,000 |
|
Note Receivable |
40,000 |
|
Allowance for Doubtful Accounts |
(9,000) |
|
Merchandise Inventory, Beginning |
270,000 |
|
Unexpired Insurance |
24,000 |
|
Furniture and Equipment |
690,000 |
|
|
(75,000) |
|
Accounts Payable |
(54,000) |
|
Common Shares |
(220,000) |
|
Retained Earnings, Beginning |
(325,000) |
|
Sales |
(2,050,000) |
|
Purchases |
640,000 |
|
Salaries Expense |
265,000 |
|
Rent Expense |
64,000 |
|
Total |
- |
At the end of the year, the following issues were noted:
The insurance contract was dated from March 1, 2020 – September 30, 202
20,000
Estimated
Depreciation on furniture and equipment is 10% per year.
Dividends of $30,000 were declared and paid to common shareholders on December 20. Payment will be made in January.
An inventory count on December 31, 2020 indicated that the total inventory on hand was $590,000.
Interest of 9% is receivable on the note on January 1 each year. The note is due to mature on January 1, 2025.
Accrued salaries at December 31, $ 31,000 were not recorded.
Required:
Identify and prepare all required
Prepare the following statements
A) Statement of Retained Earnings
B)
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