Cullumber Company’s balance sheet at December 31, 2021, is presented below. Cullumber Company Balance Sheet December 31, 2021 Cash $13,310 Accounts payable $8,900 Accounts receivable 20,100 Common stock 18,800 Allowance for doubtful accounts (720) Retained earnings 14,810 Inventory 9,820 $42,510 $42,510 During January 2022, the following transactions occurred. Cullumber uses the perpetual inventory method. Jan. 1 Cullumber accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $4,800 account. 3 Cullumber wrote off as uncollectible the accounts of Walter Corporation ($500) and Drake Company ($300). 8 Cullumber purchased $15,760 of inventory on account. 11 Cullumber sold for $26,200 on account inventory that cost $18,330. 15 Cullumber sold inventory that cost $750 to Jack Rice for $1,100. Rice charged this amount on his Visa First Bank card. The service fee charged Cullumber by First Bank is 3%. 17 Cullumber collected $21,700 from customers on account. 21 Cullumber paid $15,900 on accounts payable. 24 Cullumber received payment in full ($300) from Drake Company on the account written off on January 3. 27 Cullumber purchased advertising supplies for $1,400 cash. 31 Cullumber paid other operating expenses, $3,260. Adjustment data: 1. Interest is recorded for the month on the note from January 1. 2. Bad debts are expected to be 6% of the January 31, 2022, accounts receivable. 3. A count of advertising supplies on January 31, 2022, reveals that $510 remains unused. 4. The income tax rate is 30%. (Hint: Prepare the income statement up to Income before taxes and multiply by 30% to compute the amount; round to whole dollars.) -Prepare a classified balance sheet as of January 31, 2022
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.
Cullumber Company’s
|
Cullumber Company
Balance Sheet December 31, 2021 |
|||||||
|---|---|---|---|---|---|---|---|
|
Cash
|
$13,310 |
Accounts payable
|
$8,900 | ||||
|
|
20,100 |
Common stock
|
18,800 | ||||
|
Allowance for doubtful accounts
|
(720) |
|
14,810 | ||||
|
Inventory
|
9,820 | ||||||
| $42,510 | $42,510 |
During January 2022, the following transactions occurred. Cullumber uses the perpetual inventory method.
| Jan. 1 | Cullumber accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $4,800 account. | |
| 3 | Cullumber wrote off as uncollectible the accounts of Walter Corporation ($500) and Drake Company ($300). | |
| 8 | Cullumber purchased $15,760 of inventory on account. | |
| 11 | Cullumber sold for $26,200 on account inventory that cost $18,330. | |
| 15 | Cullumber sold inventory that cost $750 to Jack Rice for $1,100. Rice charged this amount on his Visa First Bank card. The service fee charged Cullumber by First Bank is 3%. | |
| 17 | Cullumber collected $21,700 from customers on account. | |
| 21 | Cullumber paid $15,900 on accounts payable. | |
| 24 | Cullumber received payment in full ($300) from Drake Company on the account written off on January 3. | |
| 27 | Cullumber purchased advertising supplies for $1,400 cash. | |
| 31 | Cullumber paid other operating expenses, $3,260. |
Adjustment data:
| 1. | Interest is recorded for the month on the note from January 1. | |
| 2. | ||
| 3. | A count of advertising supplies on January 31, 2022, reveals that $510 remains unused. | |
| 4. | The income tax rate is 30%. (Hint: Prepare the income statement up to Income before taxes and multiply by 30% to compute the amount; round to whole dollars.) |
-Prepare a classified balance sheet as of January 31, 2022
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