AIM Inc. showed the following equity account balances on the December 31, 2019, balance sheet: Common shares, unlimited authorized shares, 820,000 shares issued and outstanding Retained earnings $6,478,000 2,123,600 During 2020, the following selected transactions occurred: Feb.10 Repurchased and retired 159,000 common shares at $10.00 per share; this is the first retirement recorded by AIM. May 15 Declared a 2:1 share split to shareholders of record on June 1, distributable June 15. Dec. 1 Declared a 10% share dividend to shareholders of record on December 10, distributable December 20. The market prices of the shares on December 1, December 10, and December 20 were $6.00 $7.10, and $5.50, respectively. 20 Distributed the share dividend declared December 1. 31 Closed the credit balance of $801,839 in the Income Summary account. Required: a. Journalize the transactions above (assuming the retirements were the first ever recorded by AIM Inc.). The company does not use a share dividends account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 Date February 10, 2020 Common shares Retained earnings Cash Answer is not complete. General Journal Debit Credit 2 May 15, 2020 No journal entry required 3 4 December 01, 202 Retained earnings Common share dividends distributable December 20, 202 Common share dividends distributable Common shares Answer is not complete. Date February 10, 2020 Note Disclosure May 15, 2020 December 01, 2020 December 20, 2020 December 31, 2020 Note disclosure not required Note disclosure required Note disclosure not required Note disclosure not required Note disclosure not required © © Amount b. Prepare the equity section on the December 31, 2020, balance sheet. Answer is not complete. AIM INC. Equity Section of Balance Sheet December 31, 2020 Contributed capital: Retained earnings Common shares, unlimited shares authorized, 1,454,200 shares issued and outstanding Total equity $ 0
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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