Prepare the income statement for the year ended December 31.
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.
Can you please help with this question, and a quick explaination on why its ordered or structures the way it is? I am struggling with questions like this pretty bad.
The adjusted
Debit | Credit | |
---|---|---|
Cash | $ 58,000 | |
56,000 | ||
Interest receivable | 21,600 | |
Notes receivable (due in 90 days) | 172,000 | |
Office supplies | 16,500 | |
Automobiles | 174,000 | |
$ 85,000 | ||
Equipment | 140,000 | |
Accumulated depreciation—Equipment | 17,000 | |
Land | 77,000 | |
Accounts payable | 105,000 | |
Interest payable | 35,000 | |
Salaries payable | 23,000 | |
Unearned revenue | 36,000 | |
Long-term notes payable | 144,000 | |
R. Chiara, Capital | 255,800 | |
R. Chiara, Withdrawals | 46,000 | |
Services revenue | 464,000 | |
Interest revenue | 30,000 | |
Depreciation expense—Automobiles | 25,500 | |
Depreciation expense—Equipment | 21,000 | |
Salaries expense | 185,000 | |
Wages expense | 46,000 | |
Interest expense | 33,600 | |
Office supplies expense | 35,000 | |
Advertising expense | 60,000 | |
Repairs expense—Automobiles | 27,600 | |
Totals | $ 1,194,800 | $ 1,194,800 |
![### Income Statement Preparation Guide
**Objective:** Prepare the income statement for the year ended December 31.
#### Step-by-Step Preparation
1. **Title Section:**
- At the top of the income statement, write the company name, "CHIARA COMPANY."
- Below that, include the heading "Income Statement."
- Under the heading, write "For Year Ended December 31."
2. **Statement Layout:**
- The main body of the income statement is organized into several rows and columns.
- Each row represents a specific item of revenue or expense.
- There are three columns: one for descriptions, and two for numerical figures (one for amounts and one for total, if applicable).
**Detailed Breakdown of Rows:**
While the image shows lines for the entries, here's a typical series of items you might find in an income statement:
1. **Revenue Section:**
- Sales Revenue: Total income from sales of goods or services.
- Less: Sales Returns and Allowances
- Net Sales: Sales Revenue minus Sales Returns and Allowances
2. **Cost of Goods Sold (COGS):**
- Beginning Inventory
- Add: Purchases
- Less: Ending Inventory
- Cost of Goods Sold = (Beginning Inventory + Purchases) - Ending Inventory
3. **Gross Profit:**
- Gross Profit = Net Sales - Cost of Goods Sold
4. **Operating Expenses:**
- Selling Expenses (e.g., advertising, sales salaries)
- General and Administrative Expenses (e.g., office salaries, rent)
- Depreciation Expense
5. **Operating Income:**
- Operating Income = Gross Profit - Total Operating Expenses
6. **Other Revenues and Gains:**
- Interest Income
- Gain on Sale of Assets
7. **Other Expenses and Losses:**
- Interest Expense
- Loss on Sale of Assets
8. **Net Income:**
- Net Income = Operating Income + Other Revenues and Gains - Other Expenses and Losses
#### Navigation:
- Use the "Required A" and "Required B" tabs to navigate between different parts of the assignment or different sections that need attention.
This structured guide helps in systematically preparing a comprehensive income statement for a company for a specified period. Each section of the income statement needs to be carefully calculated and filled in to reflect accurate financial performance for the period.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7bd6ca04-f74b-423c-8f8e-485b90738dc0%2F0f3f7a29-355e-40fe-8a9b-2592021f4f83%2Flh7p2gc_processed.png&w=3840&q=75)
![**Instructions:**
Prepare the income statement for the year ended December 31.
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**CHIAIA COMPANY**
**Income Statement**
**For Year Ended December 31**
| **Description** | **Amount** |
|----------------------------------|---------------------|
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**Graph or Diagram Explanation:**
There is no specific graph or diagram to explain in this image. The image shows a blank income statement template intended for the "CHIARA COMPANY" for the year ended December 31. The table format includes columns for "Description" and "Amount" with multiple empty rows for data entry.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7bd6ca04-f74b-423c-8f8e-485b90738dc0%2F0f3f7a29-355e-40fe-8a9b-2592021f4f83%2Fb8tgw5_processed.png&w=3840&q=75)
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