BTS Corporation provided the following balances in its trial balance for the year ended December 31, 2021 ACCOUNT TITLES DEBIT CREDIT Patent 160,000 304,000 Prepaid rent expense Raw materials inventory Cash and cash equivalents Notes payable (due April 1, 2022) Investment in equity securities FVPL Machinery and equipment Accumulated depreciation - machinery and equipment Accounts receivables Goods in process inventory Bonds payable - at fair value Bonds payable Investment in debt securities 358,500 817,300 435,100 525,910 6,200,500 1,860,150 227,350 56,280 350,100 1,200,000 EVOCI 748,950 Land 8,450,000 Sales Accrued interest income Allowance for doubtful accounts Premium on bonds payable Retained earnings (beginning) Raw material purchases Building Accumulated depreciation - building Direct labor Notes receivable (from trade customers) Loss on change in fair value attributable to credit risk of a financial liability designated as FVPL Unrealized loss on investment in equity securities Finished goods inventory Unrealized gain on investment in debt securities 5,800,210 51,500 45,470 96,000 3,714,024 1,730,540 5,145,000 1,029,000 813,900 325,000 85,750 FVPL 103,870 245,660 FVOCI 230,350 217,940 346,920 Distribution cost Manufacturing overhead Advances to officers and employees (current) Accrued utilities expense 50,280 292,750 Income tax payable Office supplies Administrative cost 154,621 45,710 163,455 Finance cost 65,382 Accounts payable Share capital Share premium Gain on sale of equipment Purchase returns and allowance Sales discounts 326,900 8,125,000 2,057,590 164,370 68,452 290,011 Freight in Share dividends payable 173,054 2,437,500 Income tax expense 618,485 Amortization of patent 40,000 Income summary 686,780 660,440 TOTALS 29,048,027 29,048,027 Ending Beginning 256,000 Raw materials, beginning Goods in process, beginning Finished goods, beginning 358,500 105,720 56,280 245,660 325,060 686,780 Total 660,440
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.
REQUIRED: Prepare and present the following financial statement:
- Statement of Comprehensive Income (separate from
the income statement)
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