Calstone, Inc. prepares an annual combined statement of income and comprehensive income. The following situations occurred during the company's 2015 fiscal year: 1. Land that had been held as an investment was sold and a gain was recognized. _________ 2. Losses from foreign currency translation were recognized. ____________3. Interest revenue was recognized.____________4. A division was sold that qualifies as a separate component ______________5. Unrealized losses on investments accounted for as securities available for sale were recorded.___ 6. Investments were sold during the year at a loss of $300 __________7. The controller discovered an error in the calculation of 2014's revenue.____________8. Restructuring costs were incurred due to downsizing and reorganization of a manufacturing facility.________ 9. Calstone recorded an actuarial gain on its defined pension plan.10. A write-down of inventory was recorded. Required: For each situation, identify the appropriate reporting treatment from the list below (consider each event to be material). As a component of operating income. As a non-operating income item (other income or expense). As a separately reported item. As an item of other comprehensive income. As an adjustment to retained earnings.
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.
Calstone, Inc. prepares an annual combined statement of income and comprehensive income. The following situations occurred during the company's 2015 fiscal year:
1. Land that had been held as an investment was sold and a gain was recognized. _________
2. Losses from foreign currency translation were recognized. ____________
3. Interest revenue was recognized.____________
4. A division was sold that qualifies as a separate component ______________
5. Unrealized losses on investments accounted for as securities available for sale were recorded.___
6. Investments were sold during the year at a loss of $300 __________
7. The controller discovered an error in the calculation of 2014's revenue.____________
8. Restructuring costs were incurred due to downsizing and reorganization of a manufacturing facility.
________
9. Calstone recorded an actuarial gain on its defined pension plan.
10. A write-down of inventory was recorded.
Required: For each situation, identify the appropriate reporting treatment from the list below (consider each event to be material).
- As a component of operating income.
- As a non-operating income item (other income or expense).
- As a separately reported item.
- As an item of other comprehensive income.
- As an adjustment to
retained earnings .
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