Determine all consolidated balances either computationally or by using a worksheet.
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.
ollowing are financial statements for Moore Company and Kirby Company for 2021:
|
|
Moore |
Kirby |
|---|---|---|
|
Sales |
$ (800,000) |
$ (600,000) |
|
Cost of goods sold |
500,000 |
400,000 |
|
Operating and interest expenses |
100,000 |
160,000 |
|
Net income |
$ (200,000) |
$ (40,000) |
|
|
$ (990,000) |
$ (550,000) |
|
Net income |
(200,000) |
(40,000) |
|
Dividends declared |
130,000 |
–0– |
|
Retained earnings, 12/31/21 |
$(1,060,000) |
$ (590,000) |
|
Cash and receivables |
$ 217,000 |
$ 180,000 |
|
Inventory |
224,000 |
160,000 |
|
Investment in Kirby |
657,000 |
–0– |
|
Equipment (net) |
600,000 |
420,000 |
|
Buildings |
1,000,000 |
650,000 |
|
|
(100,000) |
(200,000) |
|
Other assets |
200,000 |
100,000 |
|
Total assets |
$ 2,798,000 |
$ 1,310,000 |
|
Liabilities |
$(1,138,000) |
$ (570,000) |
|
Common stock |
(600,000) |
(150,000) |
|
Retained earnings, 12/31/21 |
(1,060,000) |
(590,000) |
|
Total liabilities and equity |
$(2,798,000) |
$(1,310,000) |
-
Moore purchased 90 percent of Kirby on January 1, 2020, for $657,000 in cash. On that date, the 10 percent noncontrolling interest was assessed to have a $73,000 fair value. Also at the acquisition date, Kirby held equipment (four-year remaining life) undervalued in its financial records by $20,000 and interest-bearing liabilities (five-year remaining life) overvalued by $40,000. The rest of the excess fair over book value was assigned to previously unrecognized brand names and amortized over a 10-year life.
-
During 2020, Kirby reported a net income of $80,000 and declared no dividends.
-
Each year, Kirby sells Moore inventory at a 20 percent gross profit rate. Intra-entity sales were $145,000 in 2020 and $160,000 in 2021. On January 1, 2021, 30 percent of the 2020 transfers were still on hand, and on December 31, 2021, 40 percent of the 2021 transfers remained.
-
Moore sold Kirby a building on January 2, 2020. It had cost Moore $100,000 but had $90,000 in accumulated depreciation at the time of this transfer. The price was $25,000 in cash. At that time, the building had a five-year remaining life.
Determine all consolidated balances either computationally or by using a worksheet.
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