Preparation of Work Sheet and Adjusting and Closing Entries The following account balances are taken from the general ledger of Whitni Corporation on December 31, 2013, the end of its fiscal year. The corporation was organized January, 2005. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,250 Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,000 Allowance for Bad Debts (credit balance) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 Inventory, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,700 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,600 Accumulated Depreciation—Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 Accumulated Depreciation—Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 Notes Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,700 Common Stock, $100 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000 Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,125 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760,000 Sales Returns and Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Cost of Goods Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465,800 Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,700 Property Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,200 Salaries and Wages Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,000 Sales Commissions Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,925 Insurance Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 Interest Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 Interest Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 Data for adjustments at December 31, 2013, are as follows: (a) Depreciation (to nearest month for additions): furniture and fixtures, 10%; buildings, 4%. (b) Additions to the buildings costing $150,000 were completed June 30, 2013. (c) Allowance for Bad Debts is to be increased to a balance of $2,500. (d) Accrued expenses: sales commissions, $700; interest on notes payable, $45; property taxes, $6,000. (e) Prepaid expenses: insurance, $3,200. (f) Accrued revenue: interest on notes receivable, $750. (g) The following information is also to be recorded: (1) On December 30, the board of directors declared a quarterly dividend of $1.50 per share on common stock, payable January 25, 2014, to stockholders of record January 15, 2014. (2) Income taxes for 2013 are estimated at $15,000. (3) The only charges to Retained Earnings during the year resulted from the declaration of the regular quarterly dividends. Instructions: 1. Prepare an 8-column spreadsheet. There should be a pair of columns each for trial balance, adjustments, income statement, and balance sheet. 2. Prepare all the journal entries necessary to record the effects of the foregoing information and to adjust and close the books of the corporation.
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.
Preparation of Work Sheet and Adjusting and Closing Entries The following account balances are taken from the general ledger of Whitni Corporation on December 31, 2013, the end of its fiscal year. The corporation was organized January, 2005. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,250 Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500
(a) Depreciation (to nearest month for additions): furniture and fixtures, 10%; buildings, 4%.
(b) Additions to the buildings costing $150,000 were completed June 30, 2013.
(c) Allowance for Bad Debts is to be increased to a balance of $2,500.
(d) Accrued expenses: sales commissions, $700; interest on notes payable, $45; property taxes, $6,000.
(e) Prepaid expenses: insurance, $3,200.
(f) Accrued revenue: interest on notes receivable, $750.
(g) The following information is also to be recorded:
(1) On December 30, the board of directors declared a quarterly dividend of
$1.50 per share on common stock, payable January 25, 2014, to
stockholders of record January 15, 2014.
(2) Income taxes for 2013 are estimated at $15,000.
(3) The only charges to Retained Earnings during the year resulted from the
declaration of the regular quarterly dividends.
Instructions:
1. Prepare an 8-column spreadsheet. There should be a pair of columns each for
2. Prepare all the
information and to adjust and close the books of the corporation.
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