Retail Store had the following balances at the end of 2018. Cash $16,000 Accounts Receivable $18,500 Allowance for Doubtful Accounts $500 Retained Earnings $34,000 All accounts have normal balances. The company experienced the following events in 2019. 1.The company has 300,000 shares of common stock authorized and on January 1, 2019 they issued 75,000 shares of $2 par for $15 per share. 2.On January 1st the company borrowed $150,000 from State Bank at a 5.5% annual rate of interest. The term of the note was 10 years and required annual payments on December 31st of $19,900. 3.On January 1st the company issued bonds with a face value of $100,000. The bonds have a stated rate of 6% and mature in 5 years. The bonds were sold at 97 and carry an effective rate of 6.7262%. The bonds require an annual interest payment on December 31st of each year. 4.The company purchased equipment costing $178,000 on January 1st. The equipment is expected to have an 8 year life and have an estimated salvage value of $26,000. The company will depreciate this asset using the double-declining balance method. 5.The company provided services totaling $212,000 on account. 6.The company paid operating expenses of $65,000 throughout the year. 7.The company collected $183,000 of their accounts receivable. 8.The company re-purchased 7,000 shares of their common stock which was originally sold for $15 per share for $13 per share. 9.On December 31st the company made their first payment on the note. 10.On December 31st the company made their first interest payment on the bond. 11.The company uses the allowance method of accounting for uncollectible accounts and estimates that 4% of their accounts receivable will be uncollectible. 12.The company recorded depreciation on the equipment purchased in #4. 13.On October 31st the company declared a $21,000 dividend to all shareholders of record on December 31st to be paid on February 1, 2020. 14.From the December 2019 bank statement, the company needs to recognize $250 in interest. Required: 1. Record the 2019 transactions (Include total debits and credits).
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.
Retail Store had the following balances at the end of 2018.
Cash $16,000
Allowance for Doubtful Accounts $500
All accounts have normal balances.
The company experienced the following events in 2019.
1.The company has 300,000 shares of common stock authorized and on January 1, 2019 they issued 75,000 shares of $2 par for $15 per share. 2.On January 1st the company borrowed $150,000 from State Bank at a 5.5% annual rate of interest. The term of the note was 10 years and required annual payments on December 31st of $19,900. 3.On January 1st the company issued bonds with a face value of $100,000. The bonds have a stated rate of 6% and mature in 5 years. The bonds were sold at 97 and carry an effective rate of 6.7262%. The bonds require an annual interest payment on December 31st of each year. 4.The company purchased equipment costing $178,000 on January 1st. The equipment is expected to have an 8 year life and have an estimated salvage value of $26,000. The company will
Required:
1. Record the 2019 transactions (Include total debits and credits).
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