Case 3 Incomplete financial statements for Pepper Industries follow: Pepper Industries Income Statement For the year ended March 31, 2021 Pepper Industries The following addisional information is available about the company: a All sales during the year were on account. There was no change in the number of shares of common stock outatanding during the year. e The interest expense on the income statement relates to the bonds paysble the amount of Balance sheet March 31, 2021 Step Step Sales Cost of goods sold Gress margin Selling and administrative expenses Net operating income Interest expense Net income before taxes rent assets 4.200.000 Cash bonds outatanding did not change during the year. 4. Selected balances at the beginning of the current year were Accounta receivable, net 10 Inventory 270.000 al current seta and equipment, net l ssets Accounts receivable Inventory Total ssets 00,000 340.000 1800.000 Incomes taxes (00) Net income e Selected financial ratios computed from the satements above for the current year are Earnings per share Debt so equity ratie ities Current labilidies 320.000 230 Bonds payable, 10% O875 al labilites 13 Accounts receivable turnover 140 Current ratie Return on total ases Times interest earned ratie Acid-test ratio 275 ckholders equity Common steck. $5 par value 14 6.75 Retisned earnings al stockholders equity al sbilities& stockholders equity 16 1.25 15 Inventory turnover ratie 650
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.
Compute the missing amounts on the company’s financial statements. (Hint: What’s the difference between the acid-test ratio and the
4. Net Income
5.
6. Cash
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