Problem 4-23 (Static) Record transactions and adjustments LO 4-2, 4-6, 4-7 Following are the transactions and adjustments that occurred during the first year of operations at Kissick Company. a. Issued 800,000 shares of $5-par-value common stock for $400,000 in cash. b. Borrowed $200,000 from Oglesby National Bank and signed a 8% note due in three years. c. Incurred and paid $160,000 in salaries for the year. d. Purchased $301,000 of merchandise inventory on account during the year. e. Sold inventory costing $205,000 for a total of $250,000, all on credit. f. Paid rent of $44,000 on the sales facilities during the first 11 months of the year. g. Purchased $60,000 of store equipment, paying $18,000 in cash and agreeing to pay the difference within 90 days. h. Paid the entire $42,000 owed for store equipment and $227,000 of the amount due to suppliers for credit purchases previously recorded. i. Incurred and paid utilities expense of $15,000 during the year. j. Collected $221,000 in cash from customers during the year for credit sales previously recorded. k. At year-end, accrued $16,000 of interest on the note due to Oglesby National Bank. 1. At year-end, accrued $4,000 of past-due December rent on the sales facilities. Required: a. Record each transaction in the appropriate columns. Indicate the financial statement effect. b. Prepare the journal entry for the above transactions. Complete this question by entering your answers in the tabs below. Required A Record each transaction in the appropriate columns. Indicate the financial statement effect. Note: Enter decreases with a minus sign to indicate a negative financial statement effect. Transaction a c d. e e f 9 h i Required B j k L Cash 400,000 200,000 (160,000) (44,000) (18,000) (269,000) (15,000) 221,000 315,000+ ASSETS Accounts Receivable 250,000 (221,000) 29,000+ Merchandise Inventory 301.000 (205,000) 96,000 Equipment 60,000 60,000 = LIABILITIES Notes Payable 200,000 200,000 Accounts Payable 301,000 42,000 (269,000) 16,000 4.000 94,000+ Required A STOCKHOLDERS EQUITY Common Stock 400,000 400,000 Net income = Revenue (114,000) (114.000) = Required B > 250,000 250,000 Expenses
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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