Santo Design was founded by Thomas Grant in January 2011. Presented below is the adjusted trial balance as of December 31, 2020. Santo DesignAdjusted Trial BalanceDecember 31, 2020 Dr. Cr. Cash $ 11,350 Accounts Receivable 21,500 Supplies 5,000 Prepaid Insurance 2,500 Equipment 60,000 Accumulated Depreciation—Equipment $ 35,000 Accounts Payable 5,000 Interest Payable 150 Notes Payable 5,000 Unearned Service Revenue 5,600 Salaries and Wages Payable 1,300 Common Stock 10,000 Retained Earnings 3,500 Service Revenue 61,500 Salaries and Wages Expense 11,300 Insurance Expense 850 Interest Expense 150 Depreciation Expense 7,000 Supplies Expense 3,400 Rent Expense 4,000 000,000 $127,050 $127,050 Instructions a. Prepare an income statement and a retained earnings statement for the year ending December 31, 2020, and an unclassified balance sheet at December 31. b. Answer the following questions. 1. If the note has been outstanding 6 months, what is the annual interest rate on that note? 2. If the company paid $17,500 in salaries in 2020, what was the balance in Salaries and Wages Payable on December 31, 2019?
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.
Santo Design was founded by Thomas Grant in January 2011. Presented below is the adjusted
| Santo Design Adjusted Trial Balance December 31, 2020 |
||||
| Dr. | Cr. | |||
| Cash | $ 11,350 | |||
| 21,500 | ||||
| Supplies | 5,000 | |||
| Prepaid Insurance | 2,500 | |||
| Equipment | 60,000 | |||
| $ 35,000 | ||||
| Accounts Payable | 5,000 | |||
| Interest Payable | 150 | |||
| Notes Payable | 5,000 | |||
| Unearned Service Revenue | 5,600 | |||
| Salaries and Wages Payable | 1,300 | |||
| Common Stock | 10,000 | |||
| 3,500 | ||||
| Service Revenue | 61,500 | |||
| Salaries and Wages Expense | 11,300 | |||
| Insurance Expense | 850 | |||
| Interest Expense | 150 | |||
| Depreciation Expense | 7,000 | |||
| Supplies Expense | 3,400 | |||
| Rent Expense | 4,000 | 000,000 | ||
| $127,050 | $127,050 |
Instructions
a. Prepare an income statement and a retained earnings statement for the year ending December 31, 2020, and an unclassified
b. Answer the following questions.
1. If the note has been outstanding 6 months, what is the annual interest rate on that note?
2. If the company paid $17,500 in salaries in 2020, what was the balance in Salaries and Wages Payable on December 31, 2019?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 5 images
