The following information was drawn from the records of The Stewart Company as of December 31: Accounts Receivable $ 31,000 Interest Expense 2,750 Beginning Common Stock 19,000 Cash 42,000 Cash Flow from Investing Activities (50,000) Consulting Revenue 63,000 Land 52,000 Dividends 8,000 Ending Retained Earnings 56,500 Accounts Payable 24,000 Rent Expense 5,000 Salaries Payable 8,500 Common Stock Issued 17,000 Salaries Expense 34,250 a. Prepare the Income Statement (in good form). b. Prepare the Statement of Changes in Stockholder's Equity (in good form). c. Prepare the Balance Sheet (in good form). Total assets equal $125,000. NOTE: Be sure to calculate any missing information including totals. There may be items listed that are not on the statements listed above so you can ignore those items. ** Financial statements don't need to be double spaced. They should be prepared using the vertical statement model. Be sure to check spelling, include statement headings, and read the helpful hints.
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 following information was drawn from the records of The Stewart | ||
| Company as of December 31: |
|
Accounts Receivable |
|
$ 31,000 |
|
Interest Expense |
|
2,750 |
|
Beginning Common Stock |
|
19,000 |
|
Cash |
|
42,000 |
|
Cash Flow from Investing Activities |
|
(50,000) |
|
Consulting Revenue |
|
63,000 |
|
Land |
|
52,000 |
|
Dividends |
|
8,000 |
|
Ending |
|
56,500 |
|
Accounts Payable |
|
24,000 |
|
Rent Expense |
|
5,000 |
|
Salaries Payable |
|
8,500 |
|
Common Stock Issued |
|
17,000 |
|
Salaries Expense |
|
34,250 |
| a. | Prepare the Income Statement (in good form). | ||
| b. | Prepare the Statement of Changes in |
||
| (in good form). | |||
| c. | Prepare the |
||
| equal $125,000. | |||
| NOTE: | Be sure to calculate any missing information including | ||
| totals. There may be items listed that are not on the | |||
| statements listed above so you can ignore those items. | |||
| ** | Financial statements don't need to be double spaced. | ||
| They should be prepared using the vertical statement model. | |||
| Be sure to check spelling, include statement headings, and | |||
| read the helpful hints. |
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
