On October 31, Legacy Rocks Inc., a marble contractor, issued for cash 74,600 shares of $10 par common stock at $12, and on November 19, it issued for cash 15,640 shares of preferred stock, $40 par at $56. Required: A. Journalize the entries for October 31 and November 19. Refer to the Chart of Accounts for exact wording of account titles. B. What is the total amount invested (total paid-in capital) by all stockholders as of November 19? CHART OF ACCOUNTSLegacy Rocks Inc.General Ledger ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Selling Expenses 534 Rent Expense 535 Insurance Expense 536 Office Supplies Expense 537 Organizational Expenses 562 Depreciation Expense-Equipment 590 Miscellaneous Expense 710 Interest Expense A. Journalize the entries for October 31 and November 19. Refer to the Chart of Accounts for exact wording of account titles. PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 6 B. What is the total amount invested (total paid-in capital) by all stockholders as of November 19?
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.
| A. | |
| B. | What is the total amount invested (total paid-in capital) by all stockholders as of November 19? |
CHART OF ACCOUNTSLegacy Rocks Inc.General Ledger
| ASSETS | |
| 110 | Cash |
| 120 | Accounts Receivable |
| 131 | Notes Receivable |
| 132 | Interest Receivable |
| 141 | Merchandise Inventory |
| 145 | Office Supplies |
| 151 | Prepaid Insurance |
| 181 | Land |
| 193 | Equipment |
| 194 |
| LIABILITIES | |
| 210 | Accounts Payable |
| 221 | Notes Payable |
| 226 | Interest Payable |
| 231 | Cash Dividends Payable |
| 236 | Stock Dividends Distributable |
| 241 | Salaries Payable |
| 261 | Mortgage Note Payable |
| EQUITY | |
| 311 | Common Stock |
| 312 | Paid-In Capital in Excess of Par-Common Stock |
| 315 | |
| 321 | Preferred Stock |
| 322 | Paid-In Capital in Excess of Par-Preferred Stock |
| 331 | Paid-In Capital from Sale of Treasury Stock |
| 340 | |
| 351 | Cash Dividends |
| 352 | Stock Dividends |
| 390 | Income Summary |
| REVENUE | |
| 410 | Sales |
| 610 | Interest Revenue |
| EXPENSES | |
| 510 | Cost of Merchandise Sold |
| 515 | Credit Card Expense |
| 520 | Salaries Expense |
| 531 | Advertising Expense |
| 532 | Delivery Expense |
| 533 | Selling Expenses |
| 534 | Rent Expense |
| 535 | Insurance Expense |
| 536 | Office Supplies Expense |
| 537 | Organizational Expenses |
| 562 | Depreciation Expense-Equipment |
| 590 | Miscellaneous Expense |
| 710 | Interest Expense |
| DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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