Statement of Shareholders' Equity At the end of 2017, Jeffco Inc. had the following equity accounts and balances: Common shares, no par (175,000 shares issued and outstanding) $1,926,400 Retained earnings 310,000 During 2018, Jeffco engaged in the following transactions involving its equity accounts: Issued 8,000 common shares for $35 per share. Issued 1,000 shares of 9%, $120 stated value preferred shares at $125 per share. Declared and paid cash dividends of $15,000. Repurchased and cancelled 500 common shares for $52 per share. Required: 1. Prepare the journal entries for a through d. For a compound transaction, for those boxes in which no entry is required, leave the box blank. a. 2018 Cash Common Shares (Record issue of common shares) b. Cash Preferred Shares Contributed Surplus-Preferred Shares (Record issue of preferred shares) c. Retained Earnings (or Dividends) Cash (Record declaration and payment of dividends) d. Retained Earnings Common Shares Cash (Record repurchase of common shares)
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.
Statement of Shareholders' Equity
At the end of 2017, Jeffco Inc. had the following equity accounts and balances:
| Common shares, no par (175,000 shares issued and outstanding) | $1,926,400 |
| 310,000 |
During 2018, Jeffco engaged in the following transactions involving its equity accounts:
- Issued 8,000 common shares for $35 per share.
- Issued 1,000 shares of 9%, $120 stated value
preferred shares at $125 per share. - Declared and paid cash dividends of $15,000.
- Repurchased and cancelled 500 common shares for $52 per share.
Required:
1. Prepare the
| a. 2018 | Cash | ||
| Common Shares | |||
| (Record issue of common shares) | |||
| b. | Cash | ||
| Preferred Shares | |||
| Contributed Surplus-Preferred Shares | |||
| (Record issue of preferred shares) | |||
| c. | Retained Earnings (or Dividends) | ||
| Cash | |||
| (Record declaration and payment of dividends) | |||
| d. | Retained Earnings | ||
| Common Shares | |||
| Cash | |||
| (Record repurchase of common shares) |
2. Assume that 2018 net income was $89,600. Prepare a partial
| Jeffco, Inc. | |
| Statement of Financial Position (Partial) | |
| December 31, 2018 | |
| Shareholders' equity: | |
| Preferred shares, 9%, $120 stated value | $ |
| Common shares, no par | |
| Contributed surplus: | |
| Preferred shares | |
| Total capital stock | |
| Retained earnings | |
| Total shareholders' equity | $ |
Step by step
Solved in 2 steps with 1 images
