Presented below is a condensed balance sheet for Tiger Company as of December 31, 2020: Book Value Market Value Current Assets 200,000 225,000 Plant Assets 300,000 400,000 Total 500,000 625,000 Liabilities 150,000 125,000 Capital Stock, Par 50,000 Additional Paid-in Capital 100,000 Retained Earnings 200,000 Total 500,000 On January 1, 2020, Acquisition, Inc. issues 10,000 shares of its P10 par value stock with market value of P50 per share for the net assets of Tiger Company. 1. What is the total stockholder’s equity of Acquisition, Inc. after the acquisition? 2. The acquisition should be recorded by Acquisition Inc. with the following entry assuming stock issuance costs amounting to P405,000 was incurred:
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 is a condensed balance sheet for Tiger Company as of December 31, 2020:
Book Value Market Value
Current Assets 200,000 225,000
Plant Assets 300,000 400,000
Total 500,000 625,000
Liabilities 150,000 125,000
Capital Stock, Par 50,000
Additional Paid-in Capital 100,000
Total 500,000
On January 1, 2020, Acquisition, Inc. issues 10,000 shares of its P10 par value stock with market
value of P50 per share for the net assets of Tiger Company.
1. What is the total
2. The acquisition should be recorded by Acquisition Inc. with the following entry assuming stock
issuance costs amounting to P405,000 was incurred:
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