(1) 21,780 shares of common stock were sold at par on July 1, 2021. Net income for 2021 was $65,340. Return on common stockholders' equity (2) All of the notes payable were paid in 2021. All other liabilities remained at their December 31, 2020, levels. At December 31, 2021, total assets were $1,089,000. Debt to assets ratio (3) The market price of common stock was $1 and $15 on December 31, 2020 and 2021, respectively. Net income for 2021 was $65,340. Price-earnings ratio 2020 2021 Return on common stockholders' equity % Debt to assets ratio % Price-earnings ratio times times
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.
Please see attachment. The bottom portion is what I cannot figure out.
The following financial information is for Priscoll Company.
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Priscoll Company
Balance Sheets December 31 |
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Assets
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2020
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2019
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| Cash | $ 84,700 | $ 78,650 | ||||
| Debt investments (short-term) | 66,550 | 48,400 | ||||
| 125,840 | 108,900 | |||||
| Inventory | 278,300 | 199,650 | ||||
| Prepaid expenses | 30,250 | 27,830 | ||||
| Land | 157,300 | 157,300 | ||||
| Building and equipment (net) | 314,600 | 223,850 | ||||
| Total assets | $1,057,540 | $844,580 | ||||
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Liabilities and
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| Notes payable (short-term) | $205,700 | $145,200 | ||||
| Accounts payable | 78,650 | 62,920 | ||||
| Accrued liabilities | 48,400 | 48,400 | ||||
| Bonds payable, due 2023 | 302,500 | 205,700 | ||||
| Common stock, $10 par | 242,000 | 242,000 | ||||
| 180,290 | 140,360 | |||||
| Total liabilities and stockholders’ equity | $1,057,540 | $844,580 |
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Priscoll Company
Income Statement For the Years Ended December 31 |
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2020
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2019
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| Sales revenue | $1,067,220 | $955,900 | ||||||
| Cost of goods sold | 774,400 | 695,750 | ||||||
| Gross profit | 292,820 | 260,150 | ||||||
| Operating expenses | 229,900 | 202,070 | ||||||
| Net income | $ 62,920 | $ 58,080 |
Additional information:
| 1. | Inventory at the beginning of 2019 was $139,150. | |
| 2. | Accounts receivable (net) at the beginning of 2019 were $104,060. | |
| 3. | Total assets at the beginning of 2019 were $798,600. | |
| 4. | No common stock transactions occurred during 2019 or 2020. | |
| 5. | All sales were on account. |
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