The following financial statements and additional information are reported. At June 30 Assets Cash IKIBAN INCORPORATED Comparative Balance Sheets 2021 Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity. Accounts payable Wages payable Income taxes payable Total current liabilities Notes payable (long term) Total liabilities Equity Common stock, $5 par value Retained earnings Total liabilities and equity For Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income $ 87,500 65,000 63,800 4,400 Additional Information 220,700 124,000 (27,000) $317,700 IKIBAN INCORPORATED Income Statement Year Ended June 30, 2021 $ 25,000 6,000 3,400 34,400 30,000 64,400 220,000 33,300 $ 317,700 $ 44,000 51,000 86,500 5,400 2020 186,900 115,000 (9,000) $ 292,900 $ 30,000 15,000 3,800 48,800 60,000 108,800 160,000 24,100 $ 292,900 $ 678,000 411,000 267,000 67,000 58,600 141,400 2,000 143,400 43,890 $ 99,510 a. A $30,000 notes payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $57,600 cash. d. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain. e. Prepaid Expenses and Wages Payable relate to Operating Expenses on the income statement. f. All purchases and sales of inventory are on credit.
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.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
