Revenue Statement December 31, 2019 Sales (net Plus: Income from operations of discontinued Division P (net of $960 income taxes) Less: Dividends declared ($1.50 per common share) Net revenues Less: Selling expenses Gross profit Less: Operating expenses: Interest expense Loss on sale of Division P (net of $1,200 income tax credit) Cost of goods sold Income tax expense on income from continuing operations $ 179,000 2,240 (7,500) $ 173,740 (19,000) $ 154,740 $ 4,100 2,800 110,700 5,370 Total operating expenses (122,970) $ 31,770 Operating income Miscellaneous items: Dividend revenue General and administrative expenses Income before unusual items Unusual items: Loss on sale of land Correction of error in last year's income (net of $1,500 income taxes) Net income $ 1,800 (24,300) (22,500) $9,270 $ (4,800) 3,500 (1,300) $ 7,970 Retained Earnings Statement December 31, 2019 Beginning retained earnings Add: Net income Adjusted retained earnings Less: Loss from theft (net of $2,760 income tax credit) Ending retained earnings $62,850 7,970 $70,820 (6,440) $64,380 Coprige 30 Cimpuge Laming A Righn Roeral. Mag se coglod. samet. er duplicandia sker ia part Due to dedseik sgte tet pary co ay be ngproned trethe ak ndir schupri biialvien hes demel eet omte d mey llet be orenl king npeiener. Cempupe Leenin erves terigemnt al omietny tie sene rig m me Problems 5-69 You determine that the account &alances listed on the statements are correct but are incorrectly classified in certain cases. The company faces a 30% tax rate. No shares of common stock were issued or retired during 2019.
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.
Rox Corporation’s multiple-step income statement and
1. Review both statements and indicate where each incorrectly classified item should be classified. 2. Prepare a correct multiple-step income statement for 2019. 3. Determine the correct beginning balance in retained earnings, and then prepare a correct 2019 retained earnings statement.
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