The followving items were selected from among the transactions completed by Sherwood Co. during the current year. 1 Purchased merchandise on account from Kirkwood Co., $366,000, terms n/30. 31 Issued a 30-day, 6% note for $366,000 to Kirkwood Co., on account. Mar. Apr. 30 Paid Kirkwood Co. the amount owed on the note of March 31. 1 Borrowed $198,000 from Triple Creek Bank, issuing a 45-day, 8% note. 1 Purchased tools by issuing a $270,000, 60-day note to Poulin Co., which discounted the note at the Jun. Jul. rate of 6%. 16 Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6.5% note for $198,000. (Journalize both the debit and credit to the notes payable account.) Aug 15 Paid Triple Creek Bank the amount due on the note of July 16. 30 Paid Poulin Co. the amount due on the note of July 1. 1 Purchased equipment from Greenwood Co. for $400,000, paying $108,000 cash and issuing a series of Dec. ten 8% notes for $29,200 each, coming due at 30-day intervals. 22 Settled a product liabililty lawsult with a customer for $320,000, payable in January. Accrued the loss in a ltigation caims payable account. 31 Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. Required: 1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titiles. Assume a 360-day year. Round your answers to the nearest dollar. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles): a. Product warranty cost, $29,000.
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 items were selected from among the transactions completed by Sherwood Co. during the current year:
Required:
1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. Round your answers to the nearest dollar.
2. Journalize the
a. Product warranty cost, $29,000.
b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year.
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