Schmitt company has 2 classes of capital stock outstanding 8%, $20 par preferred and $5 par common. At December 31, 2020 the following accounts were included in stockholders' equity Preferred stock 139,000 shares $2,780,000 Common stock 2,033,000 shares 10,165,000 Paid in capital in excess of Par- Preferred 202,000 Paid in capital in excess of Par- Commonstock 26,606,000 Retained Earning $4,459,000 The following transactions affected stockholders equity during 2021 Jan 1 32,200 shares of preferred stock issued at $24 per share fevb1. 48,600 shares of common stock issued at $21 per share June 1. 2-for-1 stock split (par value reduced to $2.50) July 1 29,500 shares of common treasury stock purchased at $10 per share using the cost method Sept 15 10,100 shares of treasury stock reissued at $11 per share Dec 31. The preferred dividend is declared and a common dividend of 48 cents per share is declared Dec 31. Net income is $2,074,000 Prepare the stockholders equity section at Dec 31, 2020
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.
Schmitt company has 2 classes of capital stock outstanding 8%, $20 par preferred and $5 par common. At December 31, 2020 the following accounts were included in stockholders' equity
Common stock 2,033,000 shares 10,165,000
Paid in capital in excess of Par- Preferred 202,000
Paid in capital in excess of Par- Commonstock 26,606,000
The following transactions affected
Jan 1 32,200 shares of preferred stock issued at $24 per share
fevb1. 48,600 shares of common stock issued at $21 per share
June 1. 2-for-1 stock split (par value reduced to $2.50)
July 1 29,500 shares of common
Sept 15 10,100 shares of treasury stock reissued at $11 per share
Dec 31. The preferred dividend is declared and a common dividend of 48 cents per share is declared
Dec 31. Net income is $2,074,000
Prepare the stockholders equity section at Dec 31, 2020
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