Table Of Contents Assumption Page

Table Of Contentsassumption Page

Our Umbrella Corporation began with the cooperation of three entrepreneurial minds, who saw the benefit of combining each other’s skills and knowledge in different markets and merge it all to create the most renovating Corporation of the century.

It is better to fail in originality than to succeed in imitation.

Calculations for Accumulated Depreciation Buildings, Interest on Loan $15,000, Beginning Balances & Transactions, Beginning Balances: Cash: $15,000, Loan: $15,% APR), Common Stock: $10,000, Beg. Retained Earning: $5,000.

Accounting Period September 1, 2017 – December 17, 2017.

Transactions include: purchasing properties, rent receivables, payments received, and cash expenses.

The project involves creating a comprehensive accounting process for a new corporation, including establishing a chart of accounts, recording transactions, preparing financial statements, and following proper accounting principles across multiple reporting stages.

Paper For Above instruction

Introduction

The establishment of Our Umbrella Corporation exemplifies the critical processes and principles in modern accounting, emphasizing meticulous record-keeping, adherence to accounting standards, and accurate financial reporting. This paper provides a comprehensive walkthrough of the initial steps involved in setting up and maintaining accounting records for a new C-corporation, based on the provided assumptions and transactions.

Establishing the Business Framework

The first step in this accounting process involves creating a detailed chart of accounts, which categorizes all financial entities and operations within the company. Typical accounts include assets such as cash, properties, and receivables; liabilities like loans; equity accounts including common stock and retained earnings; income accounts covering rent income; and expense accounts for operational costs. This structured classification ensures clarity and supports precise recording and reporting.

Initial Balances and Transactions

The initial balances are set based on the provided data: cash at $15,000, a loan of $15,000 with an undefined interest rate, common stock valued at $10,000, and zero beginning retained earnings, as this is a startup. During the period from September 1, 2017, to December 17, 2017, the company made significant property purchases, including St. James Place, New York Avenue, Kentucky Avenue, Ventnor Avenue, Short Line, and Pacific Avenue, totaling a significant capital investment.

This phase also includes recording all transactions, such as purchases, rent income from tenants like Cobra Corp, Team Seven, Alpha Corp, and MMBP, and expenses such as payments to vendors. Accurate journal entries document each transaction, capturing increasing and decreasing entries across relevant accounts.

Depreciation and Property Transactions

Property investments are depreciated over their useful lives, using either Straight-Line or Units of Production methods, depending on the nature of the asset. For example, if St. James Place is expected to last 40 years with a salvage value of $200, its annual depreciation is calculated as (Cost – Salvage Value)/Useful Life, which is then prorated for partial periods. Sales of property incur gains or losses based on the asset’s book value versus selling price, recorded as gains or losses in the income statement.

Accounting Cycle

The accounting cycle begins with recording all transactions through journal entries, followed by posting to individual ledger accounts. The ledger aggregates all debits and credits per account, facilitating the creation of an unadjusted trial balance, which verifies the correctness of the entries. Adjustments are then made through adjusting journal entries to account for accrued expenses, depreciation, and other necessary corrections, resulting in an adjusted trial balance.

Financial Statements Preparation

The adjusted trial balance serves as the basis for preparing financial statements. The income statement reports revenue, expenses, and net income, including the calculation of Basic Earnings per Share, considering equal share distribution and net earnings. The Statement of Retained Earnings begins with the opening balance (zero), adds net income, subtracts dividends, and updates retained earnings.

The Balance Sheet displays company assets, liabilities, and equity at a specific date, reflecting the financial position after all adjustments. The Cash Flow Statement categorizes cash flows into operating, investing, and financing activities, illustrating cash management and liquidity position.

Closing the Accounts and Final Checks

At period end, closing entries transfer temporary account balances (revenues, expenses, dividends) to retained earnings, resetting these accounts for the next period. The post-closing trial balance ensures only permanent accounts with balances remain, confirming the correctness of the closing process.

Conclusion

This detailed accounting process for Our Umbrella Corporation demonstrates the importance of precision, adherence to standards, and systematic procedures in establishing a robust financial reporting system. Properly executed, these steps ensure the company’s financial health is accurately represented, facilitating informed decision-making by stakeholders.

References

  • Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
  • Epstein, B. J., & Jermakowicz, E. K. (2010). Implementing IFRS: Practical Guide. Wiley.
  • Gibson, C. H. (2018). Financial Reporting & Analysis. Cengage Learning.
  • Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2013). Introduction to Financial Accounting. Pearson.
  • Hogan, C. E. (2017). Accounting Theory. McGraw-Hill Education.
  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2020). Intermediate Accounting. Wiley.
  • Lee, T., & Bell, J. (2015). Managerial Accounting. McGraw-Hill Education.
  • Revsine, L., Collins, D., & Johnson, M. (2015). Financial Reporting & Analysis. Pearson.
  • Williams, J., Haka, S., & Bettner, M. (2014). Financial and Managerial Accounting. McGraw-Hill Education.
  • Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2019). Accounting Principles. Wiley.

Related Assignments