! Required information [The following information applies to the questions displayed below.] Assume that you are the president of Highlight Construction Company. At the end of the first year of operations (December 31), the following financial data for the company are available: Cash Receivables from customers (all considered collectible) Inventory of merchandise (based on physical count and priced at cost) Equipment owned, at cost less used portion Accounts payable owed to suppliers. Salary payable (on December 31, this was owed to an employee who will be paid on January 10) Total sales revenue Expenses, including the cost of the merchandise sold (excluding income taxes) Income tax expense at 30% x pretax income; all paid during the current year Common stock (December 31) Dividends declared and paid during the current year (Note: The beginning balances in Common stock and Retained earnings are zero because it is the first year of operations.) 2. Prepare a statement of stockholders' equity for the year. HIGHLIGHT CONSTRUCTION COMPANY Statement of Stockholders' Equity Balance January 1, Current year Balance December 31, Current year Common Stock $ 24,500 11,400 80,000 42,000 46,540 3,300 131,000 86,200 ? 87,500 10,800 Retained Earnings
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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Required information
[The following information applies to the questions displayed below.]
Assume that you are the president of Highlight Construction Company. At the end of the first year of operations
(December 31), the following financial data for the company are available:
Cash
Receivables from customers (all considered collectible)
Inventory of merchandise (based on physical count and priced at cost)
Equipment owned, at cost less used portion
Accounts payable owed to suppliers.
Salary payable (on December 31, this was owed to an employee who will be paid on January 10)
Total sales revenue
Expenses, including the cost of the merchandise sold (excluding income taxes)
Income tax expense at 30% × pretax income; all paid during the current year
Common stock (December 31)
2. Prepare a statement of stockholders' equity for the year.
Dividends declared and paid during the current year
(Note: The beginning balances in Common stock and Retained earnings are zero because it is the first year of operations.)
HIGHLIGHT CONSTRUCTION COMPANY
Statement of Stockholders' Equity
Balance January 1, Current year
Balance December 31, Current year
Common
Stock
$ 24,500
11,400
80,000
42,000
46,540
3,300
131,000
86, 200
?
Retained
Earnings
87,500
10,800](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F15b97afa-7c94-4ae3-b082-e59fd3b0d805%2F8fca2f3a-2b7e-49db-8f40-51cd1b1e8de6%2Ffdgrwur_processed.jpeg&w=3840&q=75)
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