1. Condensed balance sheets for B Company and C Company on January 1, 2019 are as follows: B $ 725,000 1,800,000 $335,000 565,000 Current Assets Plant and Equipment (net) Total Assets $2,525,000 $900,000 $ 375,000 Total Liabilities Common Stock, $25 par value 1,400,000 Other Contributed Capital Retained Earnings $ 135,000 400,000 215,000 150,000 500,000 250,000 Total Equities $2,525,000 $900,000 On January 1, 2019 the stockholders of B and C agreed to a consolidation whereby a new corporation, D Company, would be formed to consolidate B and C. D Company issued 50,000 shares of its $50 par value common stock for the net assets of B and C. On the date of consolidation, the fair values of B's and C's current assets and liabilities were equal to their book values. The fair value of plant and equipment for each company was: B, $2,100,000; C, $600,000. An investment banking house estimated that the fair value of D Company's common stock was $65 per share. B (as combinor) will incur $75,000 of direct acquisition costs and $25,000 in stock issue costs. а) Prepare the journal entry to record the consolidation on the books of D Company assuming that the consolidation is accounted for as a acquisition. b) Prepare the Balance Sheet of D Company as of January 1, 2019.
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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