Flint Corp. began operations in 2014. During the years 2014-2016, it reported net income and declared dividends as follows. Net income Dividends declared 2014 $31,000 $ –0– 2015 122,000 –0– 2016 230,000 49,000 During 2017, Flint Corp.: ● discovered that it had failed, in 2015, to record $50,000 in depreciation on equipment in one of its warehouses. ● changed, on January 1 ,2017, from the average cost to the FIFO method of accounting for its inventory. If Flint Corp. had applied the FIFO method to it inventory in prior years, cumulative net income (before tax) would have been $15,000 lower than originally reported. ● reported income before income tax expense of $480,000. ● declared and paid dividends to common shareholders of $80,000. Flint’s effective income tax rate for all years was 40%. (a) Prepare a 2017 retained earnings statement for Flint Corp. (List items that increase retained earnings first.)
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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Net income
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Dividends declared
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| 2014 | $31,000 | $ –0– | ||||
| 2015 | 122,000 | –0– | ||||
| 2016 | 230,000 | 49,000 |
During 2017, Flint Corp.:
| ● | discovered that it had failed, in 2015, to record $50,000 in |
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| ● | changed, on January 1 ,2017, from the average cost to the FIFO method of accounting for its inventory. If Flint Corp. had applied the FIFO method to it inventory in prior years, cumulative net income (before tax) would have been $15,000 lower than originally reported. | ||
| ● | reported income before income tax expense of $480,000. | ||
| ● | declared and paid dividends to common shareholders of $80,000. |
Flint’s effective income tax rate for all years was 40%.
(a)
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FLINT CORPORATION
Retained Earnings Statement choose the accounting period December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017 |
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select an opening name Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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$enter a dollar amount
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select an item Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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enter a dollar amount
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select an item Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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enter a dollar amount | |
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select a summarizing line for the first part Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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enter a total amount for the first part
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select between addition and deduction AddLess: select an item Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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enter a dollar amount | |
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enter a subtotal of the two previous amounts
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select between addition and deduction AddLess: select an item Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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enter a dollar amount | |
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select a closing name Correction for Depreciation ErrorCumulative Decrease in Income from Change in Inventory MethodsDividends DeclaredExpensesNet Income / (Loss)Retained Earnings, January 1, as AdjustedRetained Earnings, January 1, as ReportedRetained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
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$enter a total amount
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