Presented below are 11 income statement items from Braun Company for the year ended December 31, 2020. Sales revenue $2,700,000 Cost of goods sold 1,150,000 Interest revenue 15,000 Loss from abandonment of plant assets 45,000 Gain from extinguishment of debt 28,000 Selling expenses 290,000 Administrative expenses 190,000 Effect of change in estimated useful lives of fixed assets (included in administrative expenses) 35,000 Loss from earthquake 30,000 Gain on disposal of discontinued operation 50,000 Instructions a. Using the information above, prepare a condensed multiple-step income statement. Assume a tax rate of 30% and 100,000 shares of common stock outstanding during 2020. b. Compute comprehensive income for Braun in 2020, assuming Braun had an unrealized holding loss on an available-for-sale debt investment, net of tax, $12,000.
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.
Presented below are 11 income statement items from Braun Company for the year ended December 31, 2020.
| Sales revenue | $2,700,000 |
| Cost of goods sold | 1,150,000 |
| Interest revenue | 15,000 |
| Loss from abandonment of plant assets | 45,000 |
| Gain from extinguishment of debt | 28,000 |
| Selling expenses | 290,000 |
| Administrative expenses | 190,000 |
| Effect of change in estimated useful lives of fixed assets (included in administrative expenses) |
35,000 |
| Loss from earthquake | 30,000 |
| Gain on disposal of discontinued operation | 50,000 |
Instructions
a. Using the information above, prepare a condensed multiple-step income statement. Assume a tax rate of 30% and 100,000 shares of common stock outstanding during 2020.
b. Compute comprehensive income for Braun in 2020, assuming Braun had an unrealized holding loss on an available-for-sale debt investment, net of tax, $12,000.
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