The following is a list of the accounts and balances taken from the adjusted trial balance at December 31 2021 for Meilleur Merchants. Meilleur uses a perpetual inventory system and the earnings approach for revenue recognition. The list of accounts is in alphabetical order. All accounts have normal balances. Account Balance Dec. 31 1 Accounts payable $15,000 2 Accounts receivable 30,000 3 Accumulated depreciation—building 15,500 4 Accumulated depreciation—equipment 10,000 5 Advertising expense 4,600 6 Building 84,600 7 S. Meilleur, capital 75,000 8 S. Meilleur, drawings 28,300 9 Cash 4,500 10 Cost of goods sold 235,200 11 Depreciation expense 5,800 12 Equipment 24,500 13 Freight out 620 14 Insurance expense 1,150 15 Interest expense 1,820 16 Interest revenue 1,240 17 Land 12,000 18 Merchandise inventory 105,000 19 Mortgage payable 57,600 20 Prepaid insurance 2,100 21 Property tax expense 1,200 22 Property taxes payable 600 23 Rent revenue 1,500 24 Salaries expense 41,200 25 Salaries payable 650 26 Sales 423,600 27 Sales discounts 15,000 28 Sales returns and allowances 18,000 29 Unearned revenue 23,000 30 Utilities expense 1,900 Prepare a multiple-step income statement for Meilleur Merchant for the year ended 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 following is a list of the accounts and balances taken from the adjusted
Account | Balance Dec. 31 |
||||
1 | Accounts payable | $15,000 | |||
2 | 30,000 | ||||
3 | 15,500 | ||||
4 | Accumulated depreciation—equipment | 10,000 | |||
5 | Advertising expense | 4,600 | |||
6 | Building | 84,600 | |||
7 | S. Meilleur, capital | 75,000 | |||
8 | S. Meilleur, drawings | 28,300 | |||
9 | Cash | 4,500 | |||
10 | Cost of goods sold | 235,200 | |||
11 | Depreciation expense | 5,800 | |||
12 | Equipment | 24,500 | |||
13 | Freight out | 620 | |||
14 | Insurance expense | 1,150 | |||
15 | Interest expense | 1,820 | |||
16 | Interest revenue | 1,240 | |||
17 | Land | 12,000 | |||
18 | Merchandise inventory | 105,000 | |||
19 | Mortgage payable | 57,600 | |||
20 | Prepaid insurance | 2,100 | |||
21 | Property tax expense | 1,200 | |||
22 | Property taxes payable | 600 | |||
23 | Rent revenue | 1,500 | |||
24 | Salaries expense | 41,200 | |||
25 | Salaries payable | 650 | |||
26 | Sales | 423,600 | |||
27 | Sales discounts | 15,000 | |||
28 | Sales returns and allowances | 18,000 | |||
29 | Unearned revenue | 23,000 | |||
30 | Utilities expense | 1,900 |
Prepare a multiple-step income statement for Meilleur Merchant for the year ended December 31, 2021.
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