Prepare journal entries for the following transactions.
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.
![Question 1
25 pts
On July 1, 2018, Volunteer Inc. issued bonds with a $500,000 face value at 108.0 and the 5-year bonds have a 10% interest rate in a market with a rate of 8%.
Interest is payable annually and the effective-interest method is used for amortization. Prepare journal entries for the following transactions.
Premium on Bonds Payable
Interest Income
Discount on Bonds Payable
Interest Expense
Cash
Bonds Payable
PLEASE NOTE: For each of the following journal entries there is one account's treatment (DR or CR), that depends on whether it is a bond issued at a premium
or a discount. You are to identify if it is a DR or a CR.
You must enter the account names exactly as written above and all dollar amounts will be rounded to whole dollars with "$" and commas as needed (i.e.
$12,345).
[HINT - You definitely will want to use this EXCEL spreadsheet Chapter13 HW-03 #1-#4 Worksheets.xlsx to assist in your calculations. You will need to
complete the worksheet in order to answer all the questions. In order to use the worksheet, you will also need to apply the Market Price of Bonds (% of Face).]
July 1, 2018: to record issuing the bonds
DR
DR/CR ?
CR
• June 30, 2019: to record the amortization & payment of interest to bondholders:
DR
DR/CR ?
CR](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb4a47542-819f-4db0-82ad-3784d4341daa%2F90be49ff-85f8-4b26-8e77-2d6452717fc6%2Fqmdb7h4_processed.jpeg&w=3840&q=75)
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