E4.2 (LO 2, 3) Presented below is information related to Viel Company at December 31, 2020. Sales revenue $310,000 Cost of goods sold 140,000 Selling and administrative expenses 50,000 Gain on sale of plant assets 30,000 Unrealized gain on available-for-sale debt investments 10,000 Interest expense 6,000 Loss on discontinued operations 12,000 Dividends declared and paid 5,000 Retained Earnings, 1/1/20 100,000 Tax rate 15% Common shares outstanding 60,000 Instructions Prepare the following: (a) income statement (b) comprehensive income using the 2 statement approach, and (c) retained earnings statement
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.
E4.2 (LO 2, 3) Presented below is information related to Viel Company at December 31, 2020.
Sales revenue $310,000
Cost of goods sold 140,000
Selling and administrative expenses 50,000
Gain on sale of plant assets 30,000
Unrealized gain on available-for-sale debt investments 10,000
Interest expense 6,000
Loss on discontinued operations 12,000
Dividends declared and paid 5,000
Tax rate 15%
Common shares outstanding 60,000
Instructions
Prepare the following: (a) income statement (b) comprehensive income using the 2 statement approach, and (c) retained earnings statement
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