Contributed Capital The following is a partial list of the accounts and ending account balances taken from the post-closing trial balance of Clett Corporation on December 31, 2019: Common Stock Subscribed $10,000 Premium on Bonds Payable 50,000 Preferred Stock 400,000 Trading Investments in Common Stock 110,000 Bonds Payable 500,000 Common Stock 150,000 Additional Paid-in Capital on Preferred Stock 76,000 Available-for-Sale Investments in Bonds 90,000 Preferred Stock Subscribed 100,000 Retained Earnings 610,000 Additional Paid-in Capital on Common Stock 542,000 Unrealized Decrease in Value of Securities Available for Sale 6,000 Additional information: The bonds payable mature on December 31, 2029. They carry a 12% interest rate, payable semiannually. The premium is being amortized using the straight-line method. The 7.5% preferred stock is cumulative and convertible into 3 shares of common stock. It has a par value of $100 per share, 20,000 shares are authorized, 4,000 shares are issued and outstanding, and 1,000 shares have been subscribed at $125 per share. The common stock has a par value of $5 per share, 100,000 shares are authorized, 30,000 shares are issued and outstanding, and 2,000 shares have been subscribed at $41 per share. Required: Prepare the Contributed Capital section of the December 31, 2019, balance sheet for Clett.
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.
Contributed Capital
The following is a partial list of the accounts and ending account balances taken from the post-closing
| Common Stock Subscribed | $10,000 |
| Premium on Bonds Payable | 50,000 |
| 400,000 | |
| Trading Investments in Common Stock | 110,000 |
| Bonds Payable | 500,000 |
| Common Stock | 150,000 |
| Additional Paid-in Capital on Preferred Stock | 76,000 |
| Available-for-Sale Investments in Bonds | 90,000 |
| Preferred Stock Subscribed | 100,000 |
| 610,000 | |
| Additional Paid-in Capital on Common Stock | 542,000 |
| Unrealized Decrease in Value of Securities Available for Sale | 6,000 |
Additional information:
- The bonds payable mature on December 31, 2029. They carry a 12% interest rate, payable semiannually. The premium is being amortized using the straight-line method.
- The 7.5% preferred stock is cumulative and convertible into 3 shares of common stock. It has a par value of $100 per share, 20,000 shares are authorized, 4,000 shares are issued and outstanding, and 1,000 shares have been subscribed at $125 per share.
- The common stock has a par value of $5 per share, 100,000 shares are authorized, 30,000 shares are issued and outstanding, and 2,000 shares have been subscribed at $41 per share.
Required: Prepare the Contributed Capital section of the December 31, 2019, balance sheet for Clett.
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