The following information was provided for Macy company. The purpose of presenting these account balances is for you to prepare an income statement for the year ended December 31, 2018. Use the functional presentation and provide a supporting schedule or notes to financial statements. Make also a narrative description highlighting the importance of the information embodied herein to the users of financial statements. Sales 3,750,000 Depreciation-store equipment 35,000 Purchases 1,500,000 Office salaries 75,000 Direct Labor 475,000 Depreciation-office equipment 20,000 Indirect Labor 125,000 Depreciation-machinery 30,000 Superintendence 105,000 Sales returns and allowances 25,000 Light, heat and power 160,000 Interest income 5,000 Rent-factory building 60,000 Gain on sale of equipment 50,000 Repair and Maintenance-Machinery 25,000 Delivery expenses 100,000 Factory Supplies used 55,000 Accounting and legal fees 75,000 Sales salaries 200,000 Office expenses 125,000 Advertising 80,000 Earthquake loss 150,000 Gain from expropriation of asset 50,000 Income tax expense 160,000 Inventories: January 1 December 31 Raw Materials 100,000 140,000 Goods in process 120,000 85,000 Finished Goods 180,000 150,000
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.
The following information was provided for Macy company. The purpose of presenting
these account balances is for you to prepare an income statement for the year ended December
31, 2018. Use the functional presentation and provide a supporting schedule or notes to financial statements. Make also a narrative description highlighting the importance of the information
embodied herein to the users of financial statements.
Sales 3,750,000
Depreciation-store equipment 35,000
Purchases 1,500,000
Office salaries 75,000
Direct Labor 475,000
Depreciation-office equipment 20,000
Indirect Labor 125,000
Depreciation-machinery 30,000
Superintendence 105,000
Sales returns and allowances 25,000
Light, heat and power 160,000
Interest income 5,000
Rent-factory building 60,000
Gain on sale of equipment 50,000
Repair and Maintenance-Machinery 25,000
Delivery expenses 100,000
Factory Supplies used 55,000
Accounting and legal fees 75,000
Sales salaries 200,000
Office expenses 125,000
Advertising 80,000
Earthquake loss 150,000
Gain from expropriation of asset 50,000
Income tax expense 160,000
Inventories: January 1 December 31
Raw Materials 100,000 140,000
Goods in process 120,000 85,000
Finished Goods 180,000 150,000
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