BTS Corporation provided the following balances in its trial balance for the year ended December 31, 2021 ACCOUNT TITLES DEBIT CREDIT Patent 160,000 Prepaid rent expense 304,000 Raw materials inventory 358,500 Cash and cash equivalents 817,300 Notes payable (due April 1, 2022) 435,100 Investment in equity securities- FVPL 525,910 Machinery and equipment 6,200,500 Accumulated depreciation- machinery and equipment 1,860,150 Accounts receivables 227,350 Goods in process inventory 56,280 Bonds payable- at fair value 350,100 Bonds payable 1,200,000 Investment in debt securities- FVOCI 748,950 Land 8,450,000 Sales 5,800,210 Accrued interest income 51,500 Allowance for doubtful accounts 45,470 Premium on bonds payable 96,000 Retained earnings (beginning) 3,714,024 Raw material purchases 1,730,540 Building 5,145,000 Accumulated depreciation- building 1,029,000 Direct labor 813,900 Notes receivable (from trade customers) 325,000 Loss on change in fair value attributable to credit risk of a financial liability designated as FVPL 85,750 Unrealized loss on investment in equity securities- FVPL 103,870 Finished goods inventory 245,660 Unrealized gain on investment in debt securities- FVOCI 230,350 Distribution cost 217,940 Manufacturing overhead 346,920 Advances to officers and employees (current) 50,280 Accrued utilities expense 292,750 Income tax payable 154,621 Office supplies 45,710 Administrative cost 163,455 Finance cost 65,382 Accounts payable 326,900 Share capital 8,125,000 Share premium 2,057,590 Gain on sale of equipment 164,370 Purchase return and allowance 68,452 Sales discount 290,011 Freight in 173,054 Share dividends payable 2,437,500 Income tax expense 618,485 Amortization of patent 40,000 Income summary 686,780 TOTALS 29,048,027 29,048,027 Raw materials, beginning Goods in process, beginning Finished goods, beginning Total Beginning 256,000 105,720 325,060 686,780 Ending 358,500 56,280 245,660 660,440 REQUIRED: Prepare and present the following financial statements: Income Statement Statement of Comprehensive Income (separate from the income statement)
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.
|
ACCOUNT TITLES |
DEBIT |
CREDIT |
Patent |
160,000 |
|
Prepaid rent expense |
304,000 |
|
Raw materials inventory |
358,500 |
|
Cash and cash equivalents |
817,300 |
|
Notes payable (due April 1, 2022) |
|
435,100 |
Investment in equity securities- FVPL |
525,910 |
|
Machinery and equipment |
6,200,500 |
|
|
|
1,860,150 |
|
227,350 |
|
Goods in process inventory |
56,280 |
|
Bonds payable- at fair value |
|
350,100 |
Bonds payable |
|
1,200,000 |
Investment in debt securities- FVOCI |
748,950 |
|
Land |
8,450,000 |
|
Sales |
|
5,800,210 |
Accrued interest income
|
51,500 |
|
Allowance for doubtful accounts
|
|
45,470 |
Premium on bonds payable |
|
96,000 |
|
|
3,714,024 |
Raw material purchases |
1,730,540 |
|
Building |
5,145,000 |
|
Accumulated depreciation- building |
|
1,029,000 |
Direct labor |
813,900 |
|
Notes receivable (from trade customers) |
325,000 |
|
Loss on change in fair value attributable to credit risk of a financial liability designated as FVPL |
85,750 |
|
Unrealized loss on investment in equity securities- FVPL |
103,870 |
|
Finished goods inventory |
245,660 |
|
Unrealized gain on investment in debt securities- FVOCI |
|
230,350 |
Distribution cost |
217,940 |
|
Manufacturing overhead |
346,920 |
|
Advances to officers and employees (current) |
50,280 |
|
Accrued utilities expense |
|
292,750 |
Income tax payable |
|
154,621 |
Office supplies |
45,710 |
|
Administrative cost |
163,455 |
|
Finance cost |
65,382 |
|
Accounts payable |
|
326,900 |
Share capital |
|
8,125,000 |
Share premium |
|
2,057,590 |
Gain on sale of equipment |
|
164,370 |
Purchase return and allowance |
|
68,452 |
Sales discount |
290,011 |
|
Freight in |
173,054 |
|
Share dividends payable |
|
2,437,500 |
Income tax expense |
618,485 |
|
Amortization of patent |
40,000 |
|
Income summary |
686,780 |
|
TOTALS |
29,048,027 |
29,048,027 |
Raw materials, beginning Goods in process, beginning Finished goods, beginning Total |
Beginning 256,000 105,720 325,060 686,780 |
Ending 358,500 56,280 245,660 660,440 |
REQUIRED: Prepare and present the following financial statements:
- Income Statement
- Statement of Comprehensive Income (separate from the income statement)
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