ted income statement, what amount should be reported as consolidated total expenses, including cost of goods sold? a. P450,000 b. P455,750 c. P435,750 d. P444,250
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.
Following are selected accounts for Philadelphia Corporation and Seattle Corporation as of December 31, 2014.
|
|
Philadelphia |
Seattle |
|
Revenues |
P450,000 |
P250,000 |
|
Cost of goods sold |
180,000 |
100,000 |
|
|
70,000 |
20,000 |
|
Other expenses |
50,000 |
30,000 |
|
Investment income |
? |
- |
|
|
675,000 |
600,000 |
|
Dividends paid |
97,500 |
40,000 |
|
Current assets |
150,000 |
690,000 |
|
Land |
225,000 |
90,000 |
|
Buildings (net) |
375,000 |
140,000 |
|
Equipment (net) |
150,000 |
250,000 |
|
Common stock |
225,000 |
40,000 |
|
Additional paid-in capital |
37,500 |
160,000 |
Philadelphia obtained 100% of Seattle on January 1, 2012 by issuing 2,500 shares of its 20 par value common stock with a fair value of P190 per share. On January 1, 2012, Seattle’s land was undervalued by P20,000, its buildings (20-year life) were overvalued by P15,000 and equipment (10-year life) was undervalued by P40,000. P25,000 was attributed to an unrecorded trademark with a 10-year remaining
life. There was no
In the December 31, 2014 consolidated income statement, what amount should be reported as consolidated total expenses, including cost of goods sold?
a. P450,000
b. P455,750
c. P435,750
d. P444,250
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