The general ledger of Jackrabbit Rentals at January 1, 2021, includes the following account balances: Accounts Debits Credits Cash $ 47,500 Accounts Receivable 31,700 Land 116,800 Accounts Payable 15,900 Notes Payable (due in 2 years) 36,000 Common Stock 106,000 Retained Earnings 38,100 Totals $ 196,000 $ 196,000 The following is a summary of the transactions for the year: 1. January 12 Provide services to customers on account, $68,400. 2. February 25 Provide services to customers for cash, $78,300. 3. March 19 Collect on accounts receivable, $46,300. 4. April 30 Issue shares of common stock in exchange for $36,000 cash. 5. June 16 Purchase supplies on account, $13,300. 6. July 7 Pay on accounts payable, $11,900. 7. September 30 Pay salaries for employee work in the current year, $70,200. 8. November 22 Pay advertising for the current year, $23,100. 9. December 30 Pay $3,500 cash dividends to stockholders. The following information is available for the adjusting entries. Accrued interest on the notes payable at year-end amounted to $3,100 and will be paid January 1, 2022. Accrued salaries at year-end amounted to $2,100 and will be paid on January 5, 2022. Supplies remaining on hand at the end of the year equal $2,900. 8-a. Prepare an income statement for the year ended December 31, 2021. 8-b. Prepare a classified balance sheet 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.
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The general ledger of Jackrabbit Rentals at January 1, 2021, includes the following account balances:
| Accounts | Debits | Credits | |||||
| Cash | $ | 47,500 | |||||
| 31,700 | |||||||
| Land | 116,800 | ||||||
| Accounts Payable | 15,900 | ||||||
| Notes Payable (due in 2 years) | 36,000 | ||||||
| Common Stock | 106,000 | ||||||
| 38,100 | |||||||
| Totals | $ | 196,000 | $ | 196,000 | |||
The following is a summary of the transactions for the year:
| 1. | January | 12 | Provide services to customers on account, $68,400. | |||
| 2. | February | 25 | Provide services to customers for cash, $78,300. | |||
| 3. | March | 19 | Collect on accounts receivable, $46,300. | |||
| 4. | April | 30 | Issue shares of common stock in exchange for $36,000 cash. | |||
| 5. | June | 16 | Purchase supplies on account, $13,300. | |||
| 6. | July | 7 | Pay on accounts payable, $11,900. | |||
| 7. | September | 30 | Pay salaries for employee work in the current year, $70,200. | |||
| 8. | November | 22 | Pay advertising for the current year, $23,100. | |||
| 9. | December | 30 | Pay $3,500 cash dividends to stockholders. |
The following information is available for the
Accrued interest on the notes payable at year-end amounted to $3,100 and will be paid January 1, 2022. Accrued salaries at year-end amounted to $2,100 and will be paid on January 5, 2022. Supplies remaining on hand at the end of the year equal $2,900.
8-a. Prepare an income statement for the year ended December 31, 2021.
8-b. Prepare a classified
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