Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. GOLDEN CORPORATION Comparative Balance Sheets December 31 Current Year Prior Year Assets Cash $ 164,000 $ 107,000 Accounts receivable 83,000 71,000 Inventory 601,000 526,0
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.
Golden Corp.'s current year income statement, comparative
| GOLDEN CORPORATION Comparative Balance Sheets December 31 |
|||||||||||
| Current Year | Prior Year | ||||||||||
| Assets | |||||||||||
| Cash | $ | 164,000 | $ | 107,000 | |||||||
| Accounts receivable | 83,000 | 71,000 | |||||||||
| Inventory | 601,000 | 526,000 | |||||||||
| Total current assets | 848,000 | 704,000 | |||||||||
| Equipment | 335,000 | 299,000 | |||||||||
| Accum. |
(158,000 | ) | (104,000 | ) | |||||||
| Total assets | $ | 1,025,000 | $ | 899,000 | |||||||
| Liabilities and Equity | |||||||||||
| Accounts payable | $ | 87,000 | $ | 71,000 | |||||||
| Income taxes payable | 28,000 | 25,000 | |||||||||
| Total current liabilities | 115,000 | 96,000 | |||||||||
| Equity | |||||||||||
| Common stock, $2 par value | 592,000 | 568,000 | |||||||||
| Paid-in capital in excess of par value, common stock | 196,000 | 160,000 | |||||||||
| 122,000 | 75,000 | ||||||||||
| Total liabilities and equity | $ | 1,025,000 | $ | 899,000 | |||||||
| GOLDEN CORPORATION Income Statement For Current Year Ended December 31 |
||||||
| Sales | $ | 1,792,000 | ||||
| Cost of goods sold | 1,086,000 | |||||
| Gross profit | 706,000 | |||||
| Operating expenses | ||||||
| Depreciation expense | $ | 54,000 | ||||
| Other expenses | 494,000 | 548,000 | ||||
| Income before taxes | 158,000 | |||||
| Income taxes expense | 22,000 | |||||
| Net income | $ | 136,000 | ||||
Additional Information on Current Year Transactions
- Purchased equipment for $36,000 cash.
- Issued 12,000 shares of common stock for $5 cash per share.
- Declared and paid $89,000 in cash dividends.
Required:
Prepare a complete statement of
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