At the beginning of the year, the AAA of Rose, Inc. shows a balance of $682,000. During the year, the following items occur. Compute the end-of-year AAA balance. Operating income $452,000 Interest income 6,550 Dividend income 14,050 Municipal bond interest income 12,000 Short-term capital loss from sale of building 7,400 Section 179 expense 6,500 Charitable contributions 19,000 Cash distributions 57,000 Depreciation recapture 3,500 a.$1,185,150. b.$1,191,150. c.$1,242,150. d.$1,064,700.
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.
At the beginning of the year, the AAA of Rose, Inc. shows a balance of $682,000. During the year, the following items occur. Compute the end-of-year AAA balance.
| Operating income | $452,000 |
| Interest income | 6,550 |
| Dividend income | 14,050 |
| Municipal bond interest income | 12,000 |
| Short-term capital loss from sale of building | 7,400 |
| Section 179 expense | 6,500 |
| Charitable contributions | 19,000 |
| Cash distributions | 57,000 |
| 3,500 |
a.$1,185,150.
b.$1,191,150.
c.$1,242,150.
d.$1,064,700.
10- Misha receives a proportionate current (nonliquidating) distribution when the basis of his partnership interest is $60,000. The distribution consists of $80,000 cash and inventory (adjusted basis to the partnership of $10,000, fair market value of $20,000). How much gain or loss does Misha recognize, and what is his basis in the distributed inventory and in the partnership interest following the distribution?
a.$0 gain or loss; $20,000 basis in inventory; $50,000 basis in partnership interest.
b.$20,000 ordinary income; $0 basis in inventory; $20,000 basis in partnership interest.
c.$20,000
d.$0 gain or loss; $10,000 basis in inventory; $0 basis in partnership interest.
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