Comprehensive Problem 11-1 Floyd Corporation was formed and began operations on January 1, 2020. The corporation is located at 210 N. Main St., Pearisburg, VA 24134 and the EIN is 91-1111111. The corporation's income statement for the year and the balance sheet at year-end are presented below. The Floyd Corporation Income Statement for the Year Ended December 31, 2020 Gross income from operations $320,000 Qualified dividends received from a 15 percent-owned domestic corporation 20,000 Total gross income 340,000 Cost of goods sold (7
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.
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Comprehensive Problem 11-1
Floyd Corporation was formed and began operations on January 1, 2020. The corporation is located at 210 N. Main St., Pearisburg, VA 24134 and the EIN is 91-1111111. The corporation's income statement for the year and the balance sheet at year-end are presented below.
The Floyd Corporation Income Statement
for the Year Ended December 31, 2020Gross income from operations $320,000 Qualified dividends received from a 15
percent-owned domestic corporation20,000 Total gross income 340,000 Cost of goods sold (70,000) Total income 270,000 Other expenses: Compensation of officers $80,000 Salaries and wages 20,000 Bad debts (direct charge-offs)9,000 Repairs 3,000 Depreciation for book (tax depreciation = $90,000)10,000 Advertising 3,000 Payroll taxes 15,000 Total other expenses (140,000) Pretax book income 130,000 Income tax expense 25,200 Net income $104,800 The Floyd Corporation Balance Sheet
as of December 31, 2020Assets: Cash $140,600 Accounts receivable 20,000 Inventory (at cost) 70,000 Equipment 90,000 Less: accumulated depreciation (10,000) Total assets $310,600 Liabilities and owners' equity: Accounts payable $ 24,000 Other liabilities 16,800 Note payable (due in 10 years) 85,000 Common stock 80,000 Retained earnings 104,800 Total liabilities and owners' equity $310,600 The corporation made estimated tax payments of $9,000. Assume any overpayment is credited to the 2021 estimated tax.
Required:
Prepare Form 1120 for Floyd Corporation.- Enter all amounts as positive numbers, except for a "loss". If required, enter a "loss" as a negative number on the tax form.
- If an amount box does not require an entry, or the answer is zero, enter "0".
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