The December 31, 2021, adjusted trial balance for Fightin’ Blue Hens Corporation is presented below.Accounts Debit Credit Cash $ 12,000 Accounts Receivable 150,000 Prepaid Rent 6,000 Supplies 30,000 Equipment 400,000 Accumulated Depreciation $ 135,000 Accounts Payable 12,000 Salaries Payable 11,000 Interest Payable 5,000 Notes Payable (due in two years) 40,000 Common Stock 300,000 Retained Earnings 60,000 Service Revenue 500,000 Salaries Expense 400,000 Rent Expense 20,000 Depreciation Expense 40,000 Interest Expense 5,000 Totals $1,063,000 $1,063,000Required:1. Prepare an income statement for the year ended December 31, 2021.2. Prepare a statement of stockholders’ equity for the year ended December 31, 2021, assuming no common stock was issued during 2021.3. Prepare a classified balance sheet as of December 31, 2021.
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.
The December 31, 2021, adjusted
Accounts Debit Credit
Cash $ 12,000
Prepaid Rent 6,000
Supplies 30,000
Equipment 400,000
Accounts Payable 12,000
Salaries Payable 11,000
Interest Payable 5,000
Notes Payable (due in two years) 40,000
Common Stock 300,000
Service Revenue 500,000
Salaries Expense 400,000
Rent Expense 20,000
Depreciation Expense 40,000
Interest Expense 5,000
Totals $1,063,000 $1,063,000
Required:
1. Prepare an income statement for the year ended December 31, 2021.
2. Prepare a statement of
3. Prepare a classified
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