Following information is from first month of operations. Make a Mulit Step Income Statement 1/1 Ray incorporated B&C Inc and invested $100,000 in exchange for 100,000 shares of $1 par common stock. 1/1 Paid $9,000 for the first 6 months of rent (Jan-June) on a production facility. 1/1 Paid $4,200 for an insurance premium on a one-year policy. 1/1 Purchased a $15,000 piece of factory equipment with a 3% Note Payable which will be paid in full at the end of 2 years. This equipment has an estimated life of 5 years and an estimated residual value of $3,000. 1/2 Purchased $600 of supplies from Office Hoard Corp on account with terms 2/10, n/30. 1/3 Purchased $50,000 of raw materials from Chemical Supply Inc on account. 1/5 Requisitioned $10,000 of raw materials to begin working on Job A (a batch of doodads) and another $7,000 of raw materials to begin working on Job B. 1/8 Paid off account with Office Hoard Corp with cash. 1/10 Incurred $2,500 worth of direct labor costs while working on Job A and another $1,800 of direct labor went to Job B. 1/11 Allocated $5,000 worth of factory overhead (based on a previously calculated rate) to Job A and $3,600 is allocated to Job B. 1/13 Job A was completed. 1/16 Job A was sold for $36,000 to Retail Corp on account with FOB destination terms. 1/17 Paid $800 for delivery charges for Job A. 1/20 Incurred (but did not pay) factory overhead costs as follows: indirect wages, $4,200; indirect materials, $1,850; utilities, $2,300. 1/23 Paid all previously incurred wages with cash. 1/28 Paid $5,000 for advertising services with cash. 1/30 Incurred $1,500 of legal expenses which will be paid on February 10th. 1/30 Received $10,000 from Retail Corp to partially pay off their account. 1/30 B&C Inc issued 50,000 shares of $1 par common stock in exchange for $75,000 from Elizabeth (a new investor). 1/31 Paid $25,000 to Chemical Supply Inc to partially pay off the account. 1/31 Announced a $3,000 cash dividend which will be distributed on February 5th. 1/31 There are $120 of supplies on hand.
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.
Following information is from first month of operations. Make a Mulit Step Income Statement
1/1 Ray incorporated B&C Inc and invested $100,000 in exchange for 100,000 shares of $1 par common stock.
1/1 Paid $9,000 for the first 6 months of rent (Jan-June) on a production facility.
1/1 Paid $4,200 for an insurance premium on a one-year policy.
1/1 Purchased a $15,000 piece of factory equipment with a 3% Note Payable which will be paid in full at the end of 2 years. This equipment has an estimated life of 5 years and an estimated residual value of $3,000.
1/2 Purchased $600 of supplies from Office Hoard Corp on account with terms 2/10, n/30.
1/3 Purchased $50,000 of raw materials from Chemical Supply Inc on account.
1/5 Requisitioned $10,000 of raw materials to begin working on Job A (a batch of doodads) and another $7,000 of raw materials to begin working on Job B.
1/8 Paid off account with Office Hoard Corp with cash.
1/10 Incurred $2,500 worth of direct labor costs while working on Job A and another $1,800 of direct labor went to Job B.
1/11 Allocated $5,000 worth of factory
1/13 Job A was completed.
1/16 Job A was sold for $36,000 to Retail Corp on account with FOB destination terms.
1/17 Paid $800 for delivery charges for Job A.
1/20 Incurred (but did not pay)
1/23 Paid all previously incurred wages with cash.
1/28 Paid $5,000 for advertising services with cash.
1/30 Incurred $1,500 of legal expenses which will be paid on February 10th.
1/30 Received $10,000 from Retail Corp to partially pay off their account.
1/30 B&C Inc issued 50,000 shares of $1 par common stock in exchange for $75,000 from Elizabeth (a new investor).
1/31 Paid $25,000 to Chemical Supply Inc to partially pay off the account.
1/31 Announced a $3,000 cash dividend which will be distributed on February 5th.
1/31 There are $120 of supplies on hand.
Step by step
Solved in 2 steps with 10 images
