Condensed Statement of Financial Position for Play and Station Corporation at December 31, 2019 are as follows: Play 585,000 2,565,000 1,980,000 3,150,000 2,250,000 Station Current Assets 270,000 Noncurrent Assets Total Assets 225,000 2,250,000 225,000 450,000 3,150,000 2,250,000 On January 2, 2020, Play issues 120,000 shares of its stock with a market value of 30/share for the net assets of Station Corporation. Because of the acquisition, Station Company was dissolved. The book values reflect fair values except a noncurrent asset of Play, which has a fair value of 1,800,000, and the current assets of Station, which have a net realizable value of 450,000. Play pays 67,500 for costs of registering and issuing securities issued and 112,500 for other acquisition costs related to combination. Contract for contingent consideration to be paid to Station is 337,500. This is determined on the date of acquisition. Current Liabilities 270,000 900,000 630,000 450,000 Ordinary share, 30 Share Premium Retained Earnings Total Equities How much is the total assets of Play Corporation after the acquisition? A. 5,580,000 B. 7,357,500 C. 5,400,000 D. 7,177,500
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.
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