Presented below is the balance sheet of Sargent Corporation for the current year, 2020. Sargent CorporationBalance SheetDecember 31, 2020 Current assets $ 485,000 Current liabilities $ 380,000 Investments 640,000 Long-term liabilities 1,000,000 Property, plant, and equipment 1,720,000 Stockholders' equity 1,770,000 Intangible assets 305,000 $3,150,000 $3,150,000 The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful accounts, inventories $180,000, and unearned rent revenue $5,000. Inventory is stated on the lower-of-FIFO-cost-or-net realizable value. 2. The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term $80,000 and long-term $270,000; and bond sinking fund $250,000. The cost and fair value of investments in common stock are the same. 3. Property, plant, and equipment includes buildings $1,040,000 less accumulated depreciation $360,000, equipment $450,000 less accumulated depreciation $180,000, land $500,000, and land held for future use $270,000. 4. Intangible assets include a franchise $165,000, goodwill $100,000, and discount on bonds payable $40,000. 5. Current liabilities include accounts payable $140,000, notes payable—short-term $80,000 and long-term $120,000, and income taxes payable $40,000. 6. Long-term liabilities are composed solely of 7% bonds payable due 2028. 7. Stockholders’ equity has preferred stock, no par value, authorized 200,000 shares, issued 70,000 shares for $450,000; and common stock, $1.00 par value, authorized 400,000 shares, issued 100,000 shares at an average price of $10. In addition, the corporation has retained earnings of $320,000. Instructions Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above.
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.
Presented below is the
| Sargent Corporation Balance Sheet December 31, 2020 |
||||||
| Current assets | $ 485,000 | Current liabilities | $ 380,000 | |||
| Investments | 640,000 | Long-term liabilities | 1,000,000 | |||
| Property, plant, and equipment | 1,720,000 | 1,770,000 | ||||
| Intangible assets | 305,000 | $3,150,000 | ||||
| $3,150,000 |
The following information is presented.
1. The current assets section includes cash $150,000,
2. The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term $80,000 and long-term $270,000; and bond sinking fund $250,000. The cost and fair value of investments in common stock are the same.
3. Property, plant, and equipment includes buildings $1,040,000 less
4. Intangible assets include a franchise $165,000,
5. Current liabilities include accounts payable $140,000, notes payable—short-term $80,000 and long-term $120,000, and income taxes payable $40,000.
6. Long-term liabilities are composed solely of 7% bonds payable due 2028.
7. Stockholders’ equity has
Instructions
Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above.
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