Alena Co. was organized on July 1, 2017. Quarterly fi nancial statements are prepared. The unadjusted and adjusted trial balances as of September 30 are shown below. ALENA CO. Trial Balance September 30, 2017 Unadjusted Adjusted Dr. Cr. Dr. Cr. Cash $ 8,700 $ 8,700 Accounts Receivable 10,400 11,500 Supplies 1,500 650 Prepaid Rent 2,200 500 Equipment 18,000 18,000 Accumulated Depreciation—Equipment $ –0– $ 700 Notes Payable 10,000 10,000 Accounts Payable 2,500 2,500 Salaries and Wages Payable –0– 725 Interest Payable –0– 100 Unearned Rent Revenue 1,900 450 Owner’s Capital 22,000 22,000 Owner’s Drawings 1,600 1,600 Service Revenue 16,000 17,100 Rent Revenue 1,410 2,860 Salaries and Wages Expense 8,000 8,725 Rent Expense 1,900 3,600 Depreciation Expense 700 Supplies Expense 850 Utilities Expense 1,510 1,510 Interest Expense 100 $53,810 $53,810 $56,435 $56,435 Instructions (a) Journalize the adjusting entries that were made. (b) Prepare an income statement and an owner’s equity statement for the 3 months ending September 30 and a balance sheet at September 30. (c) If the note bears interest at 12%, how many months has it been 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.
P3-3A Alena Co. was organized on July 1, 2017. Quarterly fi nancial statements are prepared. The unadjusted and adjusted
ALENA CO.
Trial Balance
September 30, 2017
Unadjusted Adjusted
Dr. Cr. Dr. Cr.
Cash $ 8,700 $ 8,700
Accounts Receivable 10,400 11,500
Supplies 1,500 650
Prepaid Rent 2,200 500
Equipment 18,000 18,000
Accumulated
Notes Payable 10,000 10,000
Accounts Payable 2,500 2,500
Salaries and Wages Payable –0– 725
Interest Payable –0– 100
Unearned Rent Revenue 1,900 450
Owner’s Capital 22,000 22,000
Owner’s Drawings 1,600 1,600
Service Revenue 16,000 17,100
Rent Revenue 1,410 2,860
Salaries and Wages Expense 8,000 8,725
Rent Expense 1,900 3,600
Depreciation Expense 700
Supplies Expense 850
Utilities Expense 1,510 1,510
Interest Expense 100
$53,810 $53,810 $56,435 $56,435
Instructions
(a) Journalize the
(b) Prepare an income statement and an owner’s equity statement for the 3 months ending
September 30 and a
(c) If the note bears interest at 12%, how many months has it been outstanding?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images