Financial Statements and Closing Entries The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2018, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows: The Gorman Group End-of-Period Spreadsheet For the Year Ended October 31, 2018 Adjusted Trial Balance Account Title Dr. Cr. Cash $16,760 Accounts Receivable 36,480 Supplies 5,700 Prepaid Insurance 12,310 Land 130,000 Buildings 466,000 Accumulated Depreciation-Buildings 151,800 Equipment 337,000 Accumulated Depreciation-Equipment 197,800 Accounts Payable 43,150 Salaries Payable 4,280 Unearned Rent 1,940 Common Stock 194,000 Retained Earnings 360,110 Dividends 32,400 Service Fees 615,320 Rent Revenue 6,500 Salaries Expense 441,120 Depreciation Expense-Equipment 23,900 Rent Expense 20,100 Supplies Expense 14,190 Utilities Expense 12,830 Depreciation Expense-Buildings 8,550 Repairs Expense 7,070 Insurance Expense 3,880 Miscellaneous Expense 6,610 1,574,900 1,574,900 Required: 1. Prepare an income statement. The Gorman Group Income Statement For the Year Ended October 31, 2018 Revenues: fill in the blank 2 fill in the blank 4 Total Revenues fill in the blank 5 Expenses: fill in the blank 7 fill in the blank 9 fill in the blank 11 fill in the blank 13 fill in the blank 15 fill in the blank 17 fill in the blank 19 fill in the blank 21 fill in the blank 23 Total Expenses fill in the blank 24 Net income fill in the blank 25 Prepare a Retained Earnings Statement. The Gorman Group Retained Earnings Statement For the Year Ended October 31, 2018 fill in the blank 27 fill in the blank 29 fill in the blank 31 fill in the blank 33 fill in the blank 35 Prepare a balance sheet. The Gorman Group Balance Sheet October 31, 2018 Assets Liabilities Current assets: Current liabilities: fill in the blank 37 fill in the blank 39 fill in the blank 41 fill in the blank 43 fill in the blank 45 fill in the blank 47 fill in the blank 49 Total liabilities fill in the blank 50 Total current assets fill in the blank 51 Property, plant, and equipment: Stockholders' Equity fill in the blank 53 fill in the blank 55 fill in the blank 57 fill in the blank 59 fill in the blank 61 fill in the blank 63 fill in the blank 65 fill in the blank 67 fill in the blank 69 Total property, plant, and equipment fill in the blank 70 Total stockholders' equity fill in the blank 71 Total assets fill in the blank 72 Total liabilities and stockholders' equity fill in the blank 73 2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if a box does not require an entry, leave it blank. Date Account Debit Credit 2018 Oct. 31 Close revenues fill in the blank 75 fill in the blank 76 fill in the blank 78 fill in the blank 79 fill in the blank 81 fill in the blank 82 Oct. 31 Close expenses fill in the blank 84 fill in the blank 85 fill in the blank 87 fill in the blank 88 fill in the blank 90 fill in the blank 91 fill in the blank 93 fill in the blank 94 fill in the blank 96 fill in the blank 97 fill in the blank 99 fill in the blank 100 fill in the blank 102 fill in the blank 103 fill in the blank 105 fill in the blank 106 fill in the blank 108 fill in the blank 109 fill in the blank 111 fill in the blank 112 Oct. 31 Close income/loss fill in the blank 114 fill in the blank 116 Oct. 31 Close dividends fill in the blank 118 fill in the blank 120 3. If Retained Earnings had instead decreased $45,300 after the closing entries were posted, and the dividends remained the same, what would have been the amount of net income or net loss? Enter all amounts as positive numbers. $fill in the blank 121
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.
Financial Statements and Closing Entries
The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2018, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:
| The Gorman Group End-of-Period Spreadsheet For the Year Ended October 31, 2018 |
||
| Adjusted |
||
| Account Title | Dr. | Cr. |
| Cash | $16,760 | |
| 36,480 | ||
| Supplies | 5,700 | |
| Prepaid Insurance | 12,310 | |
| Land | 130,000 | |
| Buildings | 466,000 | |
| Accumulated |
151,800 | |
| Equipment | 337,000 | |
| Accumulated Depreciation-Equipment | 197,800 | |
| Accounts Payable | 43,150 | |
| Salaries Payable | 4,280 | |
| Unearned Rent | 1,940 | |
| Common Stock | 194,000 | |
| 360,110 | ||
| Dividends | 32,400 | |
| Service Fees | 615,320 | |
| Rent Revenue | 6,500 | |
| Salaries Expense | 441,120 | |
| Depreciation Expense-Equipment | 23,900 | |
| Rent Expense | 20,100 | |
| Supplies Expense | 14,190 | |
| Utilities Expense | 12,830 | |
| Depreciation Expense-Buildings | 8,550 | |
| Repairs Expense | 7,070 | |
| Insurance Expense | 3,880 | |
| Miscellaneous Expense | 6,610 | |
| 1,574,900 | 1,574,900 |
Required:
1. Prepare an income statement.
| The Gorman Group Income Statement For the Year Ended October 31, 2018 |
||
|---|---|---|
| Revenues: | ||
| fill in the blank 2 | ||
| fill in the blank 4 | ||
| Total Revenues | fill in the blank 5 | |
| Expenses: | ||
| fill in the blank 7 | ||
| fill in the blank 9 | ||
| fill in the blank 11 | ||
| fill in the blank 13 | ||
| fill in the blank 15 | ||
| fill in the blank 17 | ||
| fill in the blank 19 | ||
| fill in the blank 21 | ||
| fill in the blank 23 | ||
| Total Expenses | fill in the blank 24 | |
| Net income | fill in the blank 25 |
Prepare a Retained Earnings Statement.
| The Gorman Group Retained Earnings Statement For the Year Ended October 31, 2018 |
||
|---|---|---|
| fill in the blank 27 | ||
| fill in the blank 29 | ||
| fill in the blank 31 | ||
| fill in the blank 33 | ||
| fill in the blank 35 |
Prepare a balance sheet.
| The Gorman Group Balance Sheet October 31, 2018 |
||||||
|---|---|---|---|---|---|---|
| Assets | Liabilities | |||||
| Current assets: | Current liabilities: | |||||
| fill in the blank 37 | fill in the blank 39 | |||||
| fill in the blank 41 | fill in the blank 43 | |||||
| fill in the blank 45 | fill in the blank 47 | |||||
| fill in the blank 49 | Total liabilities | fill in the blank 50 | ||||
| Total current assets | fill in the blank 51 | |||||
| Property, plant, and equipment: | ||||||
| fill in the blank 53 | fill in the blank 55 | |||||
| fill in the blank 57 | fill in the blank 59 | |||||
| fill in the blank 61 | ||||||
| fill in the blank 63 | ||||||
| fill in the blank 65 | ||||||
| fill in the blank 67 | ||||||
| fill in the blank 69 | ||||||
| Total property, plant, and equipment | fill in the blank 70 | Total stockholders' equity | fill in the blank 71 | |||
| Total assets | fill in the blank 72 | Total liabilities and stockholders' equity | fill in the blank 73 |
2.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 2018 | |||
| Oct. 31 Close revenues | fill in the blank 75 | fill in the blank 76 | |
| fill in the blank 78 | fill in the blank 79 | ||
| fill in the blank 81 | fill in the blank 82 | ||
| Oct. 31 Close expenses | fill in the blank 84 | fill in the blank 85 | |
| fill in the blank 87 | fill in the blank 88 | ||
| fill in the blank 90 | fill in the blank 91 | ||
| fill in the blank 93 | fill in the blank 94 | ||
| fill in the blank 96 | fill in the blank 97 | ||
| fill in the blank 99 | fill in the blank 100 | ||
| fill in the blank 102 | fill in the blank 103 | ||
| fill in the blank 105 | fill in the blank 106 | ||
| fill in the blank 108 | fill in the blank 109 | ||
| fill in the blank 111 | fill in the blank 112 | ||
| Oct. 31 Close income/loss | fill in the blank 114 | ||
| fill in the blank 116 | |||
| Oct. 31 Close dividends | fill in the blank 118 | ||
| fill in the blank 120 |
3. If Retained Earnings had instead decreased $45,300 after the closing entries were posted, and the dividends remained the same, what would have been the amount of net income or net loss? Enter all amounts as positive numbers.
$fill in the blank 121
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