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    Financial Statements for Corporations Questions

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    1) What are some of the items that appear on a company's balance sheet?

    2) How does a company calculate net income?

    3) Which statements could be useful in explaining how much cash a company has used or generated during an accounting period, and why?

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    1) What are some of the items that appear on a company's balance sheet?
    1 Introduction: A corporation (company) is a separate entity. It is regulated under the state law. It has continuous life and perpetual succession. The owners are called stockholders who hold shares of stock to form the equity. The stock holders have limited liability. Corporation is managed and controlled by the board of directors. Which is elected by its shareholders? The stock of the company is common or preferred and it may have par or No par value. The preferred stockholders enjoy preferential rights with regard to payment of dividend.
    2 Special items of Balance sheet of a corporation: Because of the special provisions of the state laws regulating the companies and its unique nature and features discussed above the corporation's balance sheet is somewhat distinct from proprietorship and firm's balance sheet. Special items are discussed herewith as a brief answer to your question.
    1 Preferred stock always appears before common stock in the stockholders equity section of balance sheet. The extract of stockholders Equity is as under.
    (a) Stockholders Equity

    Preferred stock, 8%, No par, $100 stated value, 50000
    Shares authorized, 5000 shares issued 500000
    Paid in capital in excess of par-preferred stock 100000
    Common stock $1 par, 600000 shares authorized,
    84000 shares issued 84000

    Paid in capital in excess of par-common stock 1286000
    Total paid in capital 1970000
    Retained earning 190000
    Total stockholders equity 2160000

    (b) Treatment of Dividend: Dividend declared appears as current ...

    Solution Summary

    This solution assists with the financial statement questions.