Plum Company has been in receivership for the past five months. At the beginning of thi period, the following trial balance was taken from Plum Company's books. Cash $ 4,500 15,000 Accounts Receivable Inventory Property and Equipment 142,650 90,600 $252,750 $ 3,750 36,825 143,175 Allowance for Uncollectibles Accumulated Depreciation Accounts Payable
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.
![PROBLEM 10-5 Trustee Accounting and Combining Workpaper L01
Plum Company has been in receivership for the past five months. At the beginning of this
period, the following trial balance was taken from Plum Company's books.
Cash
Accounts Receivable
$ 4,500
15,000
Inventory
Property and Equipment
142,650
90,600
$252,750
$ 3,750
36,825
143,175
135,000
Allowance for Uncollectibles
Accumulated Depreciation
Accounts Payable
Capital Stock
Retained Earnings (deficit)
(66,000)
$252,750
The trustee, P. Smith, who was appointed to manage the debtor's business during the period
of liquidation, opened a new set of books and took title to Plum Company's assets on June 1,
2012. The activities of the trustee during the five-month period ended October 31, 2012, are
as follows:
1. The trustee sold all Plum Company's inventory for $153,000, of which $75,000 represented
credit sales.
2. Cash was collected on old receivables, $11,250, and on new receivables, $64,500.
3. Expenses paid during the period were
Operating expenses
Trustee expenses
$11,850
3,000
4. The trustee recorded depreciation expense of $5,250.
5. The trustee paid off all the accounts payable.
6. Estimated uncollectibles on the new accounts receivable were $2,250; the trustee wrote
off all the remaining old accounts receivable.
7. The trustee sold all the property and equipment for $43,500.
Required:
A. Prepare journal entries to record the effects of these transactions on the books of both
the trustee and Plum Company.
B. Prepare a combining workpaper at the end of the five-month period, October 31, 2012.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa232bb5c-8eb5-4398-823e-ef7d8bf77344%2F6fb0723b-0ec0-4b68-b6aa-8f4d73d8dd97%2Fu2ca9c8_processed.jpeg&w=3840&q=75)
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