Prepare the income statement for 2021 and a balance sheet as of December 31, 2021.
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.
![Requieu.
Prepare the income statement for 2021 and a balance sheet as of December 31, 2021.
Complete this question by entering your answers in the tabs below.
Income
Statement
Balance Sheet
Prepare the balance sheet as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
MCGUIRE CORPORATION
Balance Sheet
At December 31, 2021
Assets
Current assets
Cash
$ 320,000
Accounts receivable
Prepaid rent
320,000
30,000
3,000
353,000
Total current assets
Office equipment
Accumulated depreciation
Total assets
Liabilities & Shareholders' Equity
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F87f377c8-556b-40c3-ad73-583aac17d9d0%2F479ac527-7ba8-4df1-952e-dcee8e3f8fdd%2Ffhngrc9_processed.png&w=3840&q=75)
![McGuire Corporation began operations in 2021. The company purchases computer equipment from manufacturers and then sells to
retail stores. During 2021, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals
were used. The following is a recap of the cash receipts and disbursements made during the year.
Cash receipts:
Issue of common stock
$ 50,000
320,000
Collections from customers
Borrowed from local bank on April 1, note signed requiring
principal and interest at 12% to be paid on March 31, 2022
40,000
Total cash receipts
$ 410,000
Cash disbursements:
$ 220,000
Purchase of merchandise
Payment of salaries
80,000
Purchase of office equipment
30,000
14,000
Payment of rent on building
Miscellaneous expense
10,000
Total cash disbursements
$ 354,000
You are called in to prepare financial statements at December 31, 2021. The following additional information was provided to you:
1. Customers owed the company $22,000 at year-end.
2. At year-end, $30,000 was still due to suppliers of merchandise purchased on credit.
3. At year-end, merchandise inventory costing $50,000 still remained on hand.
4. Salaries owed to employees at year-end amounted to $5,000.
5. On December 1, $3,000 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of
December through February.
6. The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2021. Straight-line depreciation is
used.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F87f377c8-556b-40c3-ad73-583aac17d9d0%2F479ac527-7ba8-4df1-952e-dcee8e3f8fdd%2Fs552cbx_processed.png&w=3840&q=75)
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