The following balances were taken from the books of Schimank Corp. on December 31, 2020: Interest revenue $ 120,400 Accumulated depreciation—equipment $ 56,000 Cash 71,400 Accumulated depreciation—building 39,200 Sales 1,932,000 Notes receivable 217,000 Accounts receivable 210,000 Selling expenses 271,600 Prepaid insurance 28,000 Accounts payable 238,000 Sales returns and allowances 210,000 Bonds payable 140,000 Allowance for doubtful Administrative and general Accounts 9,800 expenses 135,800 Sales discounts 63,000 Accrued liabilities 44,800 Land 140,000 Interest expense 84,000 Equipment 280,000 Notes payable 140,000 Building 196,000 Loss from earthquake damage 210,000 Cost of goods sold 869,400 Common stock 700,000 Retained earnings 29,400 In addition, the company has a gain from the operations of a discontinued segment, before tax, of $3,000 and a loss on disposal of a segment, before tax, of $5,000. Assume the total effective tax rate on all items is 20%. Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.
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.
The following balances were taken from the books of Schimank
|
Corp. on December 31, 2020: |
|
|
|
|
Interest revenue |
$ 120,400 |
|
$ 56,000 |
|
Cash |
71,400 |
Accumulated depreciation—building |
39,200 |
|
Sales |
1,932,000 |
Notes receivable |
217,000 |
|
Accounts receivable |
210,000 |
Selling expenses |
271,600 |
|
Prepaid insurance |
28,000 |
Accounts payable |
238,000 |
|
Sales returns and allowances |
210,000 |
Bonds payable |
140,000 |
|
Allowance for doubtful |
|
Administrative and general |
|
|
Accounts |
9,800 |
expenses |
135,800 |
|
Sales discounts |
63,000 |
Accrued liabilities |
44,800 |
|
Land |
140,000 |
Interest expense |
84,000 |
|
Equipment |
280,000 |
Notes payable |
140,000 |
|
Building |
196,000 |
Loss from earthquake damage |
210,000 |
|
Cost of goods sold |
869,400 |
Common stock |
700,000 |
|
|
|
|
29,400 |
|
|
|
|
|
In addition, the company has a gain from the operations of a discontinued segment, before tax, of $3,000 and a loss on disposal of a segment, before tax, of $5,000. Assume the total effective tax rate on all items is 20%.
Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.
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