Reproduced below from Farthington Supply’s accounting records is the accounts receivable subledger along with selected general ledger accounts. General Ledger Accounts Receivable Dec. 31/19 Balance 161,000 7,050 Jan. 4/20 Credit sales in 2020 ???? ???? Collections in 2020 14,500 July 15/20 Dec. 31/20 Balance ???? Allowance for Doubtful Accounts July 15/20 14,250 250 Dec. 31/19 Balance ???? Dec. 31/20 ???? Dec. 31/20 Balance Accounts Receivable Subledger JenStar Company Dec. 31/19 Balance 49,000 Nov. 15/20 ???? 49,000 Jan. 20/20 Dec. 31/20 Balance 106,500 Indigo Developments Dec. 31/19 Balance -0- Mar. 1/20 17,500 17,500 Mar. 20/20 Nov. 28/20 40,500 Dec. 2/20 4,250 Dec. 31/20 Balance 44,750
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.
Reproduced below from Farthington Supply’s accounting records is the
| General Ledger | |||
| Accounts Receivable | |||
| Dec. 31/19 Balance | 161,000 | 7,050 | Jan. 4/20 |
| Credit sales in 2020 | ???? | ???? | Collections in 2020 |
| 14,500 | July 15/20 | ||
| Dec. 31/20 Balance | ???? |
| Allowance for Doubtful Accounts | |||
| July 15/20 | 14,250 | 250 | Dec. 31/19 Balance |
| ???? | Dec. 31/20 | ||
| ???? | Dec. 31/20 Balance |
| Accounts Receivable Subledger | |||
| JenStar Company | |||
| Dec. 31/19 Balance | 49,000 | ||
| Nov. 15/20 | ???? |
49,000 |
Jan. 20/20 |
| Dec. 31/20 Balance | 106,500 |
| Indigo Developments | |||
| Dec. 31/19 Balance | -0- | ||
| Mar. 1/20 | 17,500 | 17,500 | Mar. 20/20 |
| Nov. 28/20 | 40,500 | ||
| Dec. 2/20 | 4,250 | ||
| Dec. 31/20 Balance | 44,750 |
| Lomas Industries | |||
| Dec. 31/19 Balance | ???? | ||
| 7,050 | Jan. 4/20 | ||
| ???? | Jan. 7/20 | ||
| Apr. 21/20 | 53,500 | 53,500 | May 5/20 |
| Dec. 7/20 | 23,500 | ||
| Dec. 31/20 Balance | 23,500 |
| PDQ Servicing | |||
| Dec. 31/19 Balance | 14,500 | ||
| 14,500 | July 15/20 | ||
| Dec. 31/20 Balance | -0- |
During the year 2020, there were no recoveries of accounts previously written off. Only one account, that of PDQ Servicing, was identified as being uncollectible on July 15, 2020. On January 4, 2020, Farthington issued a $7,050 credit memo to Lomas Industries regarding damaged goods returned.
Required:
Analyzing the accounts, determine the following amounts:
a. The December 31, 2019, balance in Lomas Industries’ account.
b. The January 7, 2020, collection from Lomas Industries.
c. The December 31, 2020, balance in the Accounts Receivable controlling account.
d. The November 15, 2020, transaction in JenStar Company’s account.
e. Collections during 2020.
f. Credit sales during 2020.
g.
h. The December 31, 2020, balance in the Allowance for Doubtful Accounts. (Round your final answer to nearest whole dollar.)
i. Show how accounts receivable should appear on the balance sheet on December 31, 2020. (Round your final answers to nearest whole dollar.)
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