After formation on Aug. 1, 2018, the ledger accounts of the Ilano Corporation have the following balances: Accrued Expenses = P50,000 Accounts Payable = P400,000 Accounts Receivable = P220,000 Allowance for Uncollectible Accounts = P20,000 Building = P1,000,000 Cash = P160,000 Ordinary Shares, P250 par, 50,000 shares authorized = P1,513,000 Subscribed Ordinary Shares = P80,000 Furniture and Fixtures = P250,000 Merchandise Inventory = P1,000,000 Notes Payable-Short Term = P250,000 Organization Expense = P30,000 Share Premium-Ordinary = P60,000 Share Premium-Preference = P30,000 10% Noncumulative and Nonparticipating Preference Shares, 30,000 P500 par, 5,000 shares authorized = P250,000 10% Preference Shares Subscribed, P500 par = P100,000 Subscriptions Receivable-Ordinary = P41,000 Subscriptions Receivable-Preference = P52,000 Required: 1. Determine the following: a. How many ordinary shares are outstanding? b. How many ordinary shares are subscribed? c. How many preference shares are outstanding?
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.
After formation on Aug. 1, 2018, the ledger accounts of the Ilano Corporation have the following balances:
Accrued Expenses = P50,000
Accounts Payable = P400,000
Allowance for Uncollectible Accounts = P20,000
Building = P1,000,000
Cash = P160,000
Ordinary Shares, P250 par, 50,000 shares authorized = P1,513,000
Subscribed Ordinary Shares = P80,000
Furniture and Fixtures = P250,000
Merchandise Inventory = P1,000,000
Notes Payable-Short Term = P250,000
Organization Expense = P30,000
Share Premium-Ordinary = P60,000
Share Premium-Preference = P30,000
10% Noncumulative and Nonparticipating
10% Preference Shares Subscribed, P500 par = P100,000
Subscriptions Receivable-Ordinary = P41,000
Subscriptions Receivable-Preference = P52,000
Required:
1. Determine the following:
a. How many ordinary shares are outstanding?
b. How many ordinary shares are subscribed?
c. How many preference shares are outstanding?
d. How many preference shares are subscribed?
e. At what average price has ordinary shares been subscribed or issued?
f. Assume that no dividends are paid in the first year of the corporation's existence. What are the rights of the preference shareholders?
g. Assuming that all of the Share Premium-Ordinary was applicable to the ordinary shares that have been subscribed but not yet issued, what was the subscription price per share of the ordinary shares subscribed?
h. Assuming that the board of directors declared no dividends in 2018. what amount would have to be paid the preference shareholders in 2019 before any dividend could be paid to the ordinary shareholders?
2. Prepare a classified
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