Balance Sheet Calculations Fermer Company's balance sheet information at the end of 2019 and 2020 is as follows: 2019 2020 Total shareholders' equity $ (a) $100,700 Accumulated other comprehensive income 4,800 5,000 Current liabilities (b) 9,800 Intangible assets 12,600 12,000 Property, plant, and equipment (net) (c) 87,500 Current assets 18,000 (h) Total contributed capital 51,000 (i) Long-term liabilities (d) 30,200 Retained earnings 40,900 (j) Total assets (e) (k) Common stock, $10 par (f) (l) Working capital 9,900 10,700 Additional paid-in capital (g) 40,000 Long-term investments 23,700 (m) Total liabilities 38,100 (n) Additional information: At the end of 2019, additional paid-in capital is twice the amount of common stock. In 2020, the company issued (sold) 300 shares of common stock. Required: Prepare the correct balance sheet. All the necessary information is provided. 2019 2020 Assets Current assets Long-term investments Property, plant, and equipment (net) Intangible assets Total assets Liabilities Current liabilities Long-term liabilities Total liabilities Shareholders’ Equity Contributed Capital: Common stock, $10 par Additional paid-in capital Total contributed capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity You should note the following: Working capital = Current assets-Current liabilities If Common stock = X, then Additional paid-in capital = 2X
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.
Fermer Company's balance sheet information at the end of 2019 and 2020 is as follows:
| 2019 | 2020 | |
| Total shareholders' equity | $ (a) | $100,700 |
| Accumulated other comprehensive income | 4,800 | 5,000 |
| Current liabilities | (b) | 9,800 |
| Intangible assets | 12,600 | 12,000 |
| Property, plant, and equipment (net) | (c) | 87,500 |
| Current assets | 18,000 | (h) |
| Total contributed capital | 51,000 | (i) |
| Long-term liabilities | (d) | 30,200 |
| 40,900 | (j) | |
| Total assets | (e) | (k) |
| Common stock, $10 par | (f) | (l) |
| 9,900 | 10,700 | |
| Additional paid-in capital | (g) | 40,000 |
| Long-term investments | 23,700 | (m) |
| Total liabilities | 38,100 | (n) |
Additional information: At the end of 2019, additional paid-in capital is twice the amount of common stock. In 2020, the company issued (sold) 300 shares of common stock.
Required:
Prepare the correct balance sheet. All the necessary information is provided.
| 2019 | 2020 | |
| Assets | ||
| Current assets | ||
| Long-term investments | ||
| Property, plant, and equipment (net) | ||
| Intangible assets | ||
| Total assets | ||
| Liabilities | ||
| Current liabilities | ||
| Long-term liabilities | ||
| Total liabilities | ||
| Shareholders’ Equity | ||
| Contributed Capital: | ||
| Common stock, $10 par | ||
| Additional paid-in capital | ||
| Total contributed capital | ||
| Retained earnings | ||
| Accumulated other comprehensive income | ||
| Total shareholders' equity | ||
| Total liabilities and shareholders' equity |
You should note the following:
- Working capital = Current assets-Current liabilities
- If Common stock = X, then Additional paid-in capital = 2X
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