Problem 3-4A (Algo) reparing financial statements from the adjusted trial balance LO P5 The adjusted trial balance for Chiara Company as of December 31 follows. Cash Accounts receivable Interest receivable Notes receivable (due in 90 days) Office supplies Automobiles Accumulated depreciation-Automobiles Equipment Accumulated depreciation-Equipment Land Accounts payable Interest payable Salaries payable Unearned revenue Long-term notes payable Common stock Retained earnings Dividends Services revenue Interest revenue Depreciation expense-Automobiles Depreciation expense-Equipment Salaries expense Wages expense Interest expense Office supplies expense Advertising expense Repairs expense-Automobiles Totals Debit $ 190,000 55,500 20,000 171,500 16,500 173,000 138,000 77,000 54,000 26,500 19,000 191,000 43,000 33,400 34,400 60,000 25,000 $ 1,327,800 Credit $ 80,000 18,000 103,000 30,000 19,000 34,000 140,000 30,580 275, 220 574,000 24,000 $ 1,327,800 Required: Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31; (b) the statement of retained earnings for the year ended December 31 [Note: Retained Earnings at December 31 of the prior year was $275,220]; and (c) the balance sheet as of 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.
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Problem 3-4A (Algo) Preparing financial statements from the adjusted
trial balance LO P5
The adjusted trial balance for Chiara Company as of December 31 follows.
Cash
Accounts receivable
Interest receivable
Notes receivable (due in 90 days)
office supplies
Automobiles
Accumulated depreciation-Automobiles
Equipment
Accumulated depreciation-Equipment
Land
Accounts payable
Interest payable
Salaries payable
Unearned revenue
Long-term notes payable
Common stock
Retained earnings
Dividends
Services revenue
Interest revenue
Depreciation expense-Automobiles
Depreciation expense-Equipment
Salaries expense
Wages expense
Interest expense
office supplies expense
Advertising expense
Repairs expense-Automobiles
Totals
Debit
$ 190,000
55,500
20,000
171,500
16,500
173,000
138,000
77,000
54,000
26,500
19,000
191,000
43,000
33,400
34,400
60,000
25,000
$ 1,327,800
Credit
$ 80,000
18,000
Complete this question by entering your answers in the tabs below.
103,000
30,000
19,000
34,000
140,000
30,580
275, 220
574,000
24,000
$ 1,327,800
Required:
Use the information in the adjusted trial balance to prepare (a) the income statement for the
year ended December 31; (b) the statement of retained earnings for the year ended December
31 [Note: Retained Earnings at December 31 of the prior year was $275,220]; and (c) the
balance sheet as of December 31.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F31805107-2f58-45b8-a559-635d8f4c84ea%2F71f4ea58-f76a-46ff-adee-af491ef98f55%2F14mqzz_processed.png&w=3840&q=75)
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