9. Pineapple Co. reported total assets of P2,100,000 and total liabilities of P1,360,000 in its December 31, 2020 balance sheet. The following transactions occurred during 2021: • On August 1, Pineapple Co. issued an additional 10,000 ordinary shares at P25 per share • The company paid dividends totaling P160,000 • Net income during the year was P220,000 • Reacquired treasury shares of 4,000 at P30; subsequently reissued 2,000 shares for P39 per share • No other changes occurred in Stockholders’ Equity during the year. What is the balance of the Stockholders’ Equity section in its December 31, 2021 balance sheet? a) P800,000 b) P1,008,000-answer c) P1,050,000 d) P1,370,000
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.
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9. Pineapple Co. reported total assets of P2,100,000 and total liabilities of P1,360,000 in its December
31, 2020 balance sheet. The following transactions occurred during 2021:
• On August 1, Pineapple Co. issued an additional 10,000 ordinary shares at P25 per share
• The company paid dividends totaling P160,000
• Net income during the year was P220,000
• Reacquired treasury shares of 4,000 at P30; subsequently reissued 2,000 shares for P39 per share
• No other changes occurred in
What is the balance of the Stockholders’ Equity section in its December 31, 2021 balance sheet?
a) P800,000
b) P1,008,000-answer
c) P1,050,000
d) P1,370,000
12. In 2020, Lychee Appliance Manufacturing introduced a fully automatic washing machine with a dryer.
The sales price per unit, which comes with a warranty, is P40,000. The company offers a three-year
warranty against defects and provides service other than the agreed-upon specifications. In addition,
the customers are given the option to purchase the warranty separately. If the customer opted not to
buy the warranty, the washing machine with the dryer is sold for P37,500.
The following sales data are compiled for 2020 and 2021.
• Washing machine with dryer sold: 2020- 800; 2021- 1,000
• Warranty contracts sold: 2020- 700; 2021- 850
Lychee Appliance Manufacturing estimates that of the total pesos spent for repairs in the warranty
contracts, 20% is incurred evenly during the first warranty year, 30% evenly in the second warranty year,
and 50% evenly during the third warranty year.
Cost of servicing the units during 2020 and 2021 were P100,000 and P510,000.
How much is the company’s revenue from warranty contracts to be reported in the Statement of
Comprehensive Income for the years 2020 and 2021?
a) P175,000 and P950,000
b) P350,000 and P650,000
c) P350,000 and P950,000
d) P175,000 and P650,000-answer
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