Craig Ferguson Company has the following balances in selected accounts on December 31, 2019: Accounts Receivable $ -0- Accumulated Depreciation—Equipment 10,000 Interest Payable -0- Notes Payable 20,000 Prepaid Insurance 2,700 Salaries and Wages Payable -0- Supplies 3,500 Unearned Service Revenue 50,000 All the accounts have normal balances. The information below has been gathered at December 31, 2019. 1. Craig Ferguson Company borrowed $20,000 by signing a 12%, one-year note on August 1, 2019. 2. A count of supplies on December 31, 2019, indicates that supplies of $900 are on hand. 3. Depreciation on the equipment for 2019 is $2,000. 4. Craig Ferguson Company paid $2,700 for 12 months of insurance coverage on May 1, 2019. 5. On November 1, 2019, Craig Ferguson collected $50,000 for consulting services to be performed from November 1, 2019, through March 31, 2020. 6. Craig Ferguson performed consulting services for a client in December 2019. The client will be billed $6,300. 7. Craig Ferguson Company pays its employees total salaries of $13,000 every Monday for the preceding 5- day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2019. Instructions: Prepare adjusting entries for the seven items described above.
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.
Craig Ferguson Company has the following balances in selected accounts on December 31, 2019:
Interest Payable -0-
Notes Payable 20,000
Prepaid Insurance 2,700
Salaries and Wages Payable -0-
Supplies 3,500
Unearned Service Revenue 50,000
All the accounts have normal balances. The information below has been gathered at December 31, 2019.
1. Craig Ferguson Company borrowed $20,000 by signing a 12%, one-year note on August 1, 2019.
2. A count of supplies on December 31, 2019, indicates that supplies of $900 are on hand.
3. Depreciation on the equipment for 2019 is $2,000.
4. Craig Ferguson Company paid $2,700 for 12 months of insurance coverage on May 1, 2019.
5. On November 1, 2019, Craig Ferguson collected $50,000 for consulting services to be performed from
November 1, 2019, through March 31, 2020.
6. Craig Ferguson performed consulting services for a client in December 2019. The client will be billed
$6,300.
7. Craig Ferguson Company pays its employees total salaries of $13,000 every Monday for the preceding 5-
day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending
December 26. All employees worked the last 3 days of 2019.
Instructions:
Prepare
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