Raintree Corporation maintains its records on a cash basis. At the end of each year the company's accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2024: Cash receipts: From customers Interest on note Issue of common stock Total cash receipts Cash disbursements: Purchase of inventory Annual insurance payment Payment of salaries. Dividends paid to shareholders Annual rent payment Total cash disbursements Selected balance sheet information: Cash Accounts receivable Inventory Prepaid insurance Prepaid rent Interest receivable Note receivable Equipment Accumulated depreciation Accounts payable (for inventory) Salaries payable Common stock Dividends $ 490,000 3,480 50,000 $ 543,480 $ 228,000 7,000 188,000 7,000 14,000 $ 444,000 12/31/2023 $ 33,000 50,000 68,000 2,000 7,000 1,740 58,000 166,000 (48,000) 58,000 28,000 280,000 0 12/31/2024 $ 132,480 86,000 98,000 ? ? ? 58,000 166,000 (71,000) 78,000 44,000 330,000 9,000 Additional information: 1. On June 30, 2023, Raintree lent a customer $58,000. Interest at 6% is payable annually on each June 30. Principal is due in 2027. 2. The annual insurance payment is made in advance on March 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.
Please don't provide answer in image format thank you
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
