Chapter 4, Problem 4.5EYCT

(a)

To determine

Financial Statements: The statement prepared for the specific period which comprises the financial information of the organization. It includes a statement of income which shows the profitability of the business, balance sheet which shows the financial position in the terms of assets, liabilities, and capital, and cash flow statement which represents the cash flows for the accounting period.

Balance Sheet: Balance Sheet is a financial position statement classified as assets, stockholder’s equity and other liabilities. Whenever any transaction includes any asset or liability, it will impact the Balance Sheet.

Steps for preparations of Balance Sheet:

1. The first heading in the balance sheet preparation is assets. Under which the balances of currents assets are presented first, then the balances of long-term investments are entered and then the balances of plant, property, and equipment are entered.

2. The second heading in the balance sheet preparation is liabilities and shareholder’s equity. The liabilities are presented first, under which the balances of current liabilities and then the long-term debts balances are presented. Stockholder’s equity balances are entered after the liabilities.

3. Ensure that the balances of both the assets column and liabilities and shareholder’s equity column are equal.

To prepare: The correct balance sheet of Company W for the year ended December 31, 2019.

(b)

To determine

To identify: The terms of the bank loan has been accomplished.