The following transactions were completed by Emmanuel Company during the current fiscal year ended December 31:
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.
| Jan. | 29 | Received 40% of the $17,000 balance owed by Jankovich Co., a bankrupt business, and wrote off the remainder as uncollectible. |
| Apr. | 18 | Reinstated the account of Vince Karm, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,560 cash in full payment of Karm’s account. |
| Aug. | 9 | Wrote off the $22,380 balance owed by Golden Stallion Co., which has no assets. |
| Nov. | 7 | Reinstated the account of Wiley Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $13,220 cash in full payment of the account. |
| Dec. | 31 | Wrote off the following accounts as uncollectible (one entry): Claire Moon Inc., $22,860; Jet Set Co., $15,320; Randall Distributors, $41,460; Harmonic Audio, $18,890. |
| 31 | Based on an analysis of the $2,740,000 of |
| Required: | |||||||||
| 1. | Record the January 1 credit balance of $102,380 in a T account for Allowance for Doubtful Accounts.* | ||||||||
| 2. |
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| 3. | Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry). | ||||||||
| 4. | Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables the adjusting entry on December 31 had been based on an estimated expense of ½ of 1% of the sales of $24,900,000 for the year, determine the following:
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| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Emmanuel Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 1. Record the January 1 credit balance of $102,380 in a T account for Allowance for Doubtful Accounts.* | |
| 2b. Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.* | |
| *The ending balance label is provided on the left side of the T account even when the ending balance is a credit. The unused cell on the balance line should be left blank. | |
| Allowance for Doubtful Accounts | |||
| Jan. 29 |
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Jan. 1 Balance |
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| Aug. 9 |
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Apr. 18 |
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| Dec. 31 |
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Nov. 7 |
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| Dec. 31 Unadjusted Balance |
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Dec. 31 Adjusting Entry |
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| Dec. 31 Adj. Balance |
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| Bad Debt Expense | ||
| Dec. 31 Adjusting Entry |
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