15. Osman Odd Gifts is a merchandising company. It is a corporation, has been in business for 10 years, and only makes adjusting entries yearly for its fiscal year end December 31. In proper journal entry form, record only the adjusting entries for Dec 31, 2022 related to these assets and account balances. The necessary accounting policy info for Osman is included in each line. Your entry is just for one year or the relevant portion of the year. Show work for each in the designated area A.. Osman has a building purchased for $2,400,000 in 2013. It uses Straight-line with useful life of 30 years. B. Osman has a truck purchased for $70,000 in 2021. It uses Straight-line with useful life of 10 years and estimated salvage value of $5,000 C. Osman holds a Copyright for a jingle purchased in 2020 for $25,000. It uses Straight-line with useful life of 25 years D. Osman has an Accounts Receivable balance of $986,000 and a credit balance in Allowance for Uncollectible Accounts of $3,500 (balances before these adjusting entries). It uses the Allowance method and estimates that 4% of the total Accounts Receivable balance will not be collected. E. Osman paid $24,000 June 1, 2022 for insurance covering June 2022 through May 2023, one year. F. Osman's warehouse employees are paid every other Friday and the last payroll of the year was Dec 23. Workers earn $55,000 for their work in between the last paycheck and the end of the year.
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.
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