You are a financial planner. In July you drafted a financial plan for $2,800 and delivered it to the client. Since you know the client well and she has good credit, you will accept full payment in August. Prepare the appropriate entry for July. 10. Your company issued bonds several years ago (borrowed money) and interest payments of $600 are made twice a year on July 1, and January 1. Prepare the appropriate journal (adjusting journal entry) entry for the month of February 2007 to recognize one month of interest expense. 11. On November 14, your company declared dividends of $7,000,000 to be paid on January 19 of the next year. Prepare the appropriate journal entry for November. 12. Megan Rubber and Tire Company sells passenger car tires and uses a perpetual inventory system. On August 31, it purchased $50,000 worth of tires (from Louisiana Tire Sales) and the terms were 2/10 n 30. Prepare the appropriate journal to record the purchase of these tires. 13. Assume the facts in problem 12. The company paid the invoice on September 2. 14. Assume the facts in Problem 12. Prepare the appropriate journal entry for Louisiana Tire Sales that pertain to August 31. Hint: You are the seller. 15. Assume the facts in Problem 13. Prepare the appropriate journal entry. Hint: You are the seller. 16. On November 10, Megan Rubber and Tire Company purchased inventory and paid $900 in cash to the delivery company. 17. On December 5, Megan Rubber and Tire Company discovered that two tires had blemishes. It received an allowance for $75.00. from Louisiana Tire Sales. Assume all cash. Prepare Megan’s appropriate journal entry. 18. Assume the facts in 17. Prepare the journal entry on Louisiana Tire Sales books to record the $75.00 payment to Megan.
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.
9. You are a financial planner. In July you drafted a financial plan for $2,800 and delivered it to the client. Since you know the client well and she has good credit, you will accept full payment in August. Prepare the appropriate entry for July.
11. On November 14, your company declared dividends of $7,000,000 to be paid on January 19 of the next year. Prepare the appropriate journal entry for November.
12. Megan Rubber and Tire Company sells passenger car tires and uses a perpetual inventory system. On August 31, it purchased $50,000 worth of tires (from Louisiana Tire Sales) and the terms were 2/10 n 30. Prepare the appropriate journal to record the purchase of these tires.
13. Assume the facts in problem 12. The company paid the invoice on September 2.
14. Assume the facts in Problem 12. Prepare the appropriate journal entry for Louisiana Tire Sales that pertain to August 31. Hint: You are the seller.
15. Assume the facts in Problem 13. Prepare the appropriate journal entry. Hint: You are the seller.
18. Assume the facts in 17. Prepare the journal entry on Louisiana Tire Sales books to record the $75.00 payment to Megan.
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