Xyz trading Condensed comparative balance sheet 2021 2020 2019 Assets: Current assets 468,000. 345,600. 300,000 Property and equipment 600,000. 560,400. 500,400 Other assets(advances ). 72,000. 126,000. 150,000 Total assets. 1,140,000. 1,032,000. 950,400 Liabilities and stockholders’ equity Liabilities Current liabilities 134,400. 112,800. 100,000 12 % long-term notes payable. 240,000. 300,000 350,000 Total liabilities. 374,400. 412,800. 450,000 Stockholders’ equity 10% preferred stock 120,000. 120,000. 120,000 Common stock 300,000 240,000 200,000 Additional paid in capital 84,000. 48,000 40,000 Retained earnings 261,600. 211,200 140,400 Total stockholders’ equity. 765,600. 619,200. 500,400 Total liabilities and stockholders’ Equity 1,140,000. 1,032,000. 950,400 Xyztrading Comparative income statements 2021 2020. 2019 Net sales 1,080,000. 900,000. 800,00 Cost of goods sold. (636,000). (504,000). ( 480,000) Gross profit 444,000. 396,000. 320,000 Operating expenses: Selling 140,400. 90,000. 80,000 Administrative. 151,200. 114,000. 100,000 Total operating expenses ( 291,600). ( 204,000). ( 180,000) Operating income 152,400. 192,000. 140,000 Interest expense ( 28,800). ( 36,000 ). ( 30,000) Income before income tax. 123,600. 156,000. 110,000 Income tax ( 43,260). ( 54,600 ). (. 38,500) Income after tax php 80,340. 101,400. 71,500 Prepare the following ratios for xyz trading: Return on owners’ investment Profit margin/return on sales Return on assets
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.
Xyz trading
Condensed comparative balance sheet
2021 2020 2019
Assets:
Current assets 468,000. 345,600. 300,000
Property and equipment 600,000. 560,400. 500,400
Other assets(advances ). 72,000. 126,000. 150,000
Total assets. 1,140,000. 1,032,000. 950,400
Liabilities and
Liabilities
Current liabilities 134,400. 112,800. 100,000
12 % long-term notes payable. 240,000. 300,000 350,000
Total liabilities. 374,400. 412,800. 450,000
Stockholders’ equity
10%
Common stock 300,000 240,000 200,000
Additional paid in capital 84,000. 48,000 40,000
Total stockholders’ equity. 765,600. 619,200. 500,400
Total liabilities and stockholders’
Equity 1,140,000. 1,032,000. 950,400
Xyztrading
Comparative income statements
2021 2020. 2019
Net sales 1,080,000. 900,000. 800,00
Cost of goods sold. (636,000). (504,000). ( 480,000)
Gross profit 444,000. 396,000. 320,000
Operating expenses:
Selling 140,400. 90,000. 80,000
Administrative. 151,200. 114,000. 100,000
Total operating expenses ( 291,600). ( 204,000). ( 180,000)
Operating income 152,400. 192,000. 140,000
Interest expense ( 28,800). ( 36,000 ). ( 30,000)
Income before income tax. 123,600. 156,000. 110,000
Income tax ( 43,260). ( 54,600 ). (. 38,500)
Income after tax php 80,340. 101,400. 71,500
Prepare the following ratios for xyz trading:
- Return on owners’ investment
- Profit margin/return on sales
- Return on assets
Current ratio - Quick ratio
- Debt ratio
- Debt equity ratio
- Stockholders’ ratio
- Interest coverage ratio = operating income/ interest expense
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