Johnson Graphics Company was organized on January 1, 2017, by Cameron Johnson. At the end of the fi rst 6 months of operations, the trial balance contained the following accounts Debit Credit Cash $ 8,600 Notes Payable $ 20,000 Accounts Receivable 14,000 Accounts Payable 9,000 Equipment 45,000 Owner’s Capital 22,000 Insurance Expense 2,700 Sales Revenue 52,100 Salaries and Wages Expense 30,000 Service Revenue 6,000 Supplies Expense 3,700 Advertising Expense 1,900 Rent Expense 1,500 Utilities Expense 1,700 $109,100 $109,100 Analysis reveals the following additional data. 1. The $3,700 balance in Supplies Expense represents supplies purchased in January. At June 30, $1,500 of supplies are on hand. 2. The note payable was issued on February 1. It is a 9%, 6-month note. 3. The balance in Insurance Expense is the premium on a one-year policy, dated March 1, 2017. 4. Service revenues are credited to revenue when received. At June 30, services revenue of $1,300 are unearned. 5. Revenue for services performed but unrecorded at June 30 totals $2,000. 6. Depreciation is $2,250 per year. Instructions (a) Journalize the adjusting entries at June 30. (Assume adjustments are recorded every 6 months.) (b) Prepare an adjusted trial balance. (c) Prepare an income statement and owner’s equity statement for the 6 months ended June 30 and a balance sheet at June 30
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.
Johnson Graphics Company was organized on January 1, 2017, by Cameron Johnson.
At the end of the fi rst 6 months of operations, the
Debit Credit
Cash $ 8,600 Notes Payable $ 20,000
Accounts Receivable 14,000 Accounts Payable 9,000
Equipment 45,000 Owner’s Capital 22,000
Insurance Expense 2,700 Sales Revenue 52,100
Salaries and Wages Expense 30,000 Service Revenue 6,000
Supplies Expense 3,700
Advertising Expense 1,900
Rent Expense 1,500
Utilities Expense 1,700
$109,100 $109,100
Analysis reveals the following additional data.
1. The $3,700 balance in Supplies Expense represents supplies purchased in January. At
June 30, $1,500 of supplies are on hand.
2. The note payable was issued on February 1. It is a 9%, 6-month note.
3. The balance in Insurance Expense is the premium on a one-year policy, dated March 1,
2017.
4. Service revenues are credited to revenue when received. At June 30, services revenue of
$1,300 are unearned.
5. Revenue for services performed but unrecorded at June 30 totals $2,000.
6.
Instructions
(a) Journalize the
6 months.)
(b) Prepare an adjusted trial balance.
(c) Prepare an income statement and owner’s equity statement for the 6 months ended
June 30 and a
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