1. What is the amount debited to accumulated profits as a result of the declaration of the 10% stock dividend in item f? 2. What is the amount debited to accumulated profits as a result of the 2016 cash dividend declaration?
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.
JBL Corp. reported the following amounts in the shareholders' equity section of its December 31, 2015,
40,000 shares issued) P400,000
Ordinary shares, P5 par (50,000 shares authorized, 20,000 shares issued) 100,000
Share premium – Ordinary shares 192,000
The following transactions occurred during 2016:
a. At the beginning of 2016, the company paid the annual 2015 P1 per share dividend
on preference shares and PO.50 per share dividend on ordinary shares. These dividends had been declared on
December 1, 2015.Further investigations revealed that no entry has been made to account for the declaration of the
said dividends.
b. On February 13, the company purchased 4,000 shares of its own outstanding ordinary shares for P80,000.
c. On March 30, the company declared and issued ordinary shares split-up (1 is to 2).
d. On June 19, the company reissued 2,800 treasury shares for an equipment with a fair value at P50,000.
e. On August 1, the company issued 10,000 shares of preference shares at P15 per share.
f. On September 30, the company declared a 10% stock dividend on the outstanding ordinary shares when the stock is
selling for P6 per share. The share dividends were subsequently issued on October 11.
g. December 1, the company declared the annual 2016 P1 dividend on preference shares and the PO.25 per share
dividend on ordinary shares. These dividends are payable at the beginning of 2017.
h. The company registered a net income for 2016 at P940,000.
Requirements:
1. What is the amount debited to accumulated profits as a result of the declaration of the 10% stock dividend
in item f?
2. What is the amount debited to accumulated profits as a result of the 2016 cash dividend declaration?
please answer the two questions with solution.
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