This problem is based on the transactions for the Take Wings Company in your text. Prepare journal entries for each transaction and identify the financial statement impact of each entry. The financial statements are automatically generated based on the journal entries recorded. Dec. 1 On December 1, John Fox forms a consulting business, named Take Wings. Take Wings receives $62,000 cash from John Fox as an owner contribution. Dec. 2 Take Wings pays $4,100 cash for supplies. The company's policy is to record all prepaid expenses in asset accounts. Dec. 3 Take Wings pays $46,000 cash for equipment. Dec. 4 Take Wings purchases $9,550 of supplies on credit from a supplier, CalTech Supply. Dec. 5 Take Wings provides consulting services and immediately collects $5,800 cash. Dec. 6 Take Wings pays $2,600 cash for December rent. Dec. 7 Take Wings pays $1,100 cash for employee salary. Dec. 8 Take Wings provides consulting services of $3,700 and rents its test facilities for $2,400. The customer is billed $6,100 for these services. Dec. 9 Take Wings receives $6,100 cash from the client billed on December 8. Dec. 10 Take Wings pays CalTech Supply $2,500 cash as partial payment for its December 4 $9,550 purchase of supplies. Dec. 11 John Fox withdraws $1,000 cash from Take Wings for personal use. Dec. 12 Take Wings receives $3,800 cash in advance of providing consulting services to a customer. The company's policy is to record fees collected in advance in a balance sheet account. Dec. 13 Take Wings pays $4,000 cash (insurance premium) for a 24-month insurance policy. Coverage begins on December 1. The company's policy is to record all prepaid expenses in a balance sheet account. Dec. 14 Take Wings pays $1,720 cash for supplies. Dec. 15 Take Wings pays $1,905 cash for December utilities expense. Dec. 16 Take Wings pays $1,500 cash in employee salary for work p
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.
This problem is based on the transactions for the Take Wings Company in your text. Prepare
| Dec. | 1 | On December 1, John Fox forms a consulting business, named Take Wings. Take Wings receives $62,000 cash from John Fox as an owner contribution. | ||
| Dec. | 2 | Take Wings pays $4,100 cash for supplies. The company's policy is to record all prepaid expenses in asset accounts. | ||
| Dec. | 3 | Take Wings pays $46,000 cash for equipment. | ||
| Dec. | 4 | Take Wings purchases $9,550 of supplies on credit from a supplier, CalTech Supply. | ||
| Dec. | 5 | Take Wings provides consulting services and immediately collects $5,800 cash. | ||
| Dec. | 6 | Take Wings pays $2,600 cash for December rent. | ||
| Dec. | 7 | Take Wings pays $1,100 cash for employee salary. | ||
| Dec. | 8 | Take Wings provides consulting services of $3,700 and rents its test facilities for $2,400. The customer is billed $6,100 for these services. | ||
| Dec. | 9 | Take Wings receives $6,100 cash from the client billed on December 8. | ||
| Dec. | 10 | Take Wings pays CalTech Supply $2,500 cash as partial payment for its December 4 $9,550 purchase of supplies. | ||
| Dec. | 11 | John Fox withdraws $1,000 cash from Take Wings for personal use. | ||
| Dec. | 12 | Take Wings receives $3,800 cash in advance of providing consulting services to a customer. The company's policy is to record fees collected in advance in a balance sheet account. | ||
| Dec. | 13 | Take Wings pays $4,000 cash (insurance premium) for a 24-month insurance policy. Coverage begins on December 1. The company's policy is to record all prepaid expenses in a balance sheet account. | ||
| Dec. | 14 | Take Wings pays $1,720 cash for supplies. | ||
| Dec. | 15 | Take Wings pays $1,905 cash for December utilities expense. | ||
| Dec. | 16 |
Take Wings pays $1,500 cash in employee salary for work performed in the latter part of December.
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