Jaguar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following: Cash $22,000 Investments (short-term) $3,000 Accounts receivable $3,000 Inventory $20,000 Notes receivable (long-term) $1,000 Equipment $50,000 Factory building $90,000 Intangibles $5,000 Accounts payable $15,000 Accrued liabilities payable. $4,000 Notes payable (current) $7,000 Notes payable (noncurrent) $47,000 Common stock $10,000 Additional paid-in capital $80,000 Retained earnings $31,000 During the current year, the company had the following summarized activities: Purchased short-term investments for $10,000 cash. Lent $5,000 to a supplier, who signed a two-year note. Purchased equipment that cost $18,000; paid $5,000 cash and signed a one- year note for the balance. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance. The new president begins her position on January 1 of next year. Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash. Borrowed $9,000 cash from a local bank, payable in three months. Purchased a patent (an intangible asset) for $3,000 cash. Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000. Create T-accounts for each of the accounts taken from the accounting records shown above and enter the end-of-year balances as the beginning balances for the current year. Record each of the events for the current year in T-accounts (including referencing) and determine the ending balances. Explain your response to event (d) Prepare a trial balance at December 31 of the current year. Prepare a classified balance sheet at December 31 of the current year. Compute the current ratio for the current year. What does this suggest about Jaguar Plastics?
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.
Jaguar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following:
Cash $22,000
Investments (short-term) $3,000
Accounts receivable $3,000
Inventory $20,000
Notes receivable (long-term) $1,000
Equipment $50,000
Factory building $90,000
Intangibles $5,000
Accounts payable $15,000
Accrued liabilities payable. $4,000
Notes payable (current) $7,000
Notes payable (noncurrent) $47,000
Common stock $10,000
Additional paid-in capital $80,000
Retained earnings $31,000
During the current year, the company had the following summarized activities:
- Purchased short-term investments for $10,000 cash.
- Lent $5,000 to a supplier, who signed a two-year note.
- Purchased equipment that cost $18,000; paid $5,000 cash and signed a one- year note for the balance.
- Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance. The new president begins her position on January 1 of next year.
- Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash.
- Borrowed $9,000 cash from a local bank, payable in three months.
- Purchased a patent (an intangible asset) for $3,000 cash.
- Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance.
- Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.
- Create T-accounts for each of the accounts taken from the accounting records shown above and enter the end-of-year balances as the beginning balances for the current year.
- Record each of the events for the current year in T-accounts (including referencing) and determine the ending balances.
- Explain your response to event (d)
- Prepare a
trial balance at December 31 of the current year. - Prepare a classified balance sheet at December 31 of the current year.
- Compute the
current ratio for the current year. What does this suggest about Jaguar Plastics?
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