(a)
A financial statement is the complete record of financial transactions that take place in a company at a particular period of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements; they are:
- The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a
profit and loss statement. The net income is the excess of revenue over expenses. - The
retained earnings statement: This is a financial statement that shows the amount of net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to shareholders. - The balance sheet: This is a financial statement that shows the assets, liabilities, and
stockholders’ equity of a company at a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as theStatement of Financial Position . It helps the users to know about the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. - Statement of cash flows: This is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financial activities of a company.
Annual Report: It is a comprehensive financial report that shows all the business activities that takes place throughout the previous financial year. Its purpose is to provide the complete financial information of a company’s financial activities to its users in order to help them analyze, and take well informed decisions.
To determine: the total cost and book value of property, plant, and equipment at September 27, 2014.
(b)
the method of depreciation used by Incorporation A for financial reporting purposes.
(c)
the amount of depreciation and amortization expense for 3 years: 2012, 2013, 2014.
(d)
the amounts of property, plant, and equipment purchased in 2014 and 2013.
(e)
the accounting treatment for its intangible assets in 2014.
Want to see the full answer?
Check out a sample textbook solutionChapter 9 Solutions
FINANCIAL ACCOUNTING>IC<
- The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2016. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Depreciation is computed from the first of the month of acquisition to the first of the month of disposition. Land A and Building A were acquired from a predecessor corporation. Thompson paid $712,500 for the land and building together. At the time of acquisition, the land had a fair value of $96,000 and the building had a fair value of $704,000. Land B was acquired on October 2, 2016, in exchange for 2,000 newly issued shares of…arrow_forwardABC Company is preparing its financial statements for the year ended December 31, 2023. During the year, the company purchased new equipment for $50,000 and incurred repair expenses of $5,000 on existing machinery. The company is unsure about how to treat these costs in its financial statements. Should the equipment purchase cost and repair expenses be capitalized or expensed? Justify your answer with appropriate accounting principles.arrow_forwardJUBILEE is a quoted company reporting under IFRSs. During the year end 31 December 2012, the company changed its accounting policy with respect to property valuation. There are also a number of other issues that need to be finalised before the financial statements can be published.JUBILEE’s trial balance from the general ledger at 31 December 2012 showed the following balances:GH¢’mGH¢’mRevenue 2,648Loan note interest paid3Purchases1,669Distribution costs514Administrative expenses345Interim dividend paid6Inventories at 1 January 2012444Trade receivables545Trade payables434Cash and cash equivalents2850Gp ordinary shares100Capital surplus814Retained earnings at 1 January 20123494% loan note repayable 2018 (issued 2010)150Land and buildings: Cost (including GH¢60m land) 380 Accumulated depreciation at 1/1/201264Plant and equipment: Cost 258 Accumulated depreciation at 1/1/2012126Investment property at 1 January 2012548Rental income48Proceeds from sale of equipment7,4,7404,740Further…arrow_forward
- (Change in Principle, Estimate) As a certified public accountant, you have been contacted by Joe Davison, CEO of Sports-Pro Athletics, Inc., a manufacturer of a variety of athletic equipment. He has asked you how to account for the following changes.1. Sports-Pro appropriately changed its depreciation method for its machinery from the double-declining-balance method to the units-of-production method effective January 1, 2017.2. Effective January 1, 2017, Sports-Pro appropriately changed the salvage values used in computing depreciation for its office equipment.3. On December 31, 2017, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented.InstructionsWrite a 1–1.5 page letter to Joe Davison explaining how each of the above changes should be presented in the December 31, 2017, financial statements.arrow_forwardBailey Company was formed in January 2017 and is preparing its financial statements under GAAP for the first time at the end of 2019. Its general ledger at December 31, 2019, includes the following assets: Patent $120,000 Copyright 140,000 Trade name 150,000 Computer software 90,000 Start-up costs 30,000 Intellectual capital 150,000 Goodwill 90,000 As the recently hired accountant for Bailey, you have been asked to make sure that the company’s accounting for intangible assets follows GAAP. Based on your investigation, you determine the following: • The patent acquired in January 2019 has an expected life of 15 years and no residual value, and it will generate approximately equal benefits each year. • Bailey will use the copyright and trade name for the foreseeable future. • The computer software was purchased in January 2019 and is used in the Bailey’s 20 offices around the country. It is expected to be replaced with new software at the beginning of 2021.…arrow_forwardAs a certified public accountant, you have been contacted by Joe Davison, CEO of Sports-Pro Athletics, Inc., a manufacturer of a variety of athletic equipment. He has asked you how to account for the fol-lowing changes. 1. Sports-Pro appropriately changed its depreciation method for its machinery from the double-declining-balance method to the units-of-production method effective January 1, 2017.2. Effective January 1, 2017, Sports-Pro appropriately changed the salvage values used in computing depreciation for its of-fice equipment.3. On December 31, 2017, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented. How would the #3 event effect the financial statements of the company ?arrow_forward
- The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2022. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Depreciation is computed from the first of the month of acquisition to the first of the month of disposition. Land A and Building A were acquired from a predecessor corporation. Thompson paid $882,500 for the land and building together. At the time of acquisition, the land had a fair value of $97,000 and the building had a fair value of $873,000. Land B was acquired on October 2, 2022, in exchange for 3,700 newly issued shares of Thompson’s…arrow_forwardThe Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2022. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Depreciation is computed from the first of the month of acquisition to the first of the month of disposition. Land A and Building A were acquired from a predecessor corporation. Thompson paid $912,500 for the land and building together. At the time of acquisition, the land had a fair value of $100,000 and the building had a fair value of $900,000. Land B was acquired on October 2, 2022, in exchange for 4,000 newly issued shares of Thompson’s…arrow_forwardIntangibles. Sorenson Manufacturing Corporation was incorporated on January 3, 2016. The corporation’s financial statements for its first year’s operations were not examined by a CPA. You have been engaged to audit the financial statements for the year ended December 31, 2017, and your work is substantially completed. A partial trial balance of the company’s accounts follows: Check the below image for partial trial balance. The following information relates to accounts that may yet require adjustment:1. Patents for Sorenson’s manufacturing process were purchased January 2, 2017, at a cost of $68,000. An additional $17,000 was spent in December 2016 to improve machinery covered by the patents and charged to the Patents account. The patents had a remaining legal term of 17 years.2. On January 3, 2014, Sorenson purchased two licensing agreements; at that time they were believed to have unlimited useful lives. The balance in the Licensing Agreement No. 1 account included its purchase price…arrow_forward
- Presented below is information related to Cramer, Inc. Instructions Comment on the appropriateness of the accounting procedures followed by Cramer, Inc. a. Depreciation expense on the building for the year was $60,000. Because the building was increasing in value during the year, the controller decided to charge the depreciation expense to retained earnings instead of to net income. The following entry is recorded. Retained Earnings 60,000 Accumulated Depreciation—Buildings 60,000 b. Materials were purchased on January 1, 2020, for $120,000 and this amount was entered in the Materials account. On December 31, 2020, the materials would have cost $141,000, so the following entry is made. Inventory 21,000 Gain on Inventories 21,000 c. During the year, the company purchased equipment through the issuance of common stock. The stock had a par value of $135,000 and a fair value of $450,000. The fair value of the equipment was not…arrow_forwardThe following accounts correspond to the company Hisellav, S.A, which is dedicated to providing maintenance services. The information is relative to the year 2010 and the company asks you to help prepay its income statement and balance sheet for that year with all formality: Salaries payable 6400 public services 2900 Share capital 42,000 building depreciation 4400 income from services 76,300 materials inventory 7900 ISR 3900 trademark 17,600 loss on sale of asset 6000 promotion 15,000 providers 82,200 ESPS 14,000 interest on mortgage 13,000 sales per diem 8000 Retained earnings as of 12/31/09 19,400 clients 38,800 Accumulated depreciation building 18800 interest income 1400 Building 94,000 cash 18800 currency translation gain 3000 mortgage 26,600 rental income 10,500 rent paid in advance 1 year 42,300arrow_forwardThe following expenditures relating to plant assets were made by Glenn Company during the first 2 months of 2014.(b) Indicate the account title to which each expenditure should be debited. 1. Paid $7,000 of accrued taxes at the time the plant site was acquired. choose an account title Land ImprovementsLandLicense ExpenseEquipmentPrepaid Insurance 2. Paid $200 insurance to cover a possible accident loss on new factory machinery while the machinery was in transit. choose an account title LandLand ImprovementsPrepaid InsuranceEquipmentLicense Expense 3. Paid $850 sales taxes on a new delivery truck. choose an account title LandLand ImprovementsPrepaid InsuranceLicense ExpenseEquipment 4. Paid $21,000 for parking lots and driveways on the new plant site. choose an account title EquipmentLicense ExpenseLand ImprovementsLandPrepaid Insurance 5. Paid $250 to have the company name and slogan painted on the new delivery truck. choose an…arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning