- Transaction Analysis
For each of the following transactions, show the effect if any of the transaction or adjustments on the appropriate balance sheet category or on net income by ensuring for each category affected the account name and amount and indicate whether this is an addition (+) or subtraction (-) using the horizontal analysis. Items that affect net income should notalso be shown as affecting owners equity.
- Bonds payable with a face amount of $15,000 are issued at par on August 1. The coupon interest rate is 8% and interest is paid semi-annually.
- At the end of December the company accrues the interest that is payable on the bonds issued in (a).
- On Feb. 1 the company pays the interest on the bonds
- Bonds payable with a face amount of $5,000 are issued at a price of 99 (That means at 99% of par value)
- Of the proceeds from the bonds issued in (d), $3,000 is used to purchase land for future expansion
- Because of warranty claims, finished goods inventories costing $200 is sent to customers to replace defective products
- The 4 month 10% (annual interest rate) note payable with face amount of $12,000 was signed. The bank made the loan on a discount basis.
- A long-term bond with principal of $25,000 will become due within the current year.
- At the end of the month, the company recognizes its rent obligation of $4000 which it has not yet paid.
- In the next month the company pays both the current month s rent of $4000 and pays the previous month s rent which it had accrued.
|Transaction / Adjustment
||Bonds payable with a face amount of $15,000 are issued at par.
||Cash + 15,000
||Bonds Payable +15,000
||At the end of December the company accrues the interest that is payable on the bonds issued in (a)
||On Feb. 1 the company pays the interest on the bonds
||Bonds payable with a face amount of $5,000 are issued at a price of 99.
||Of the proceeds from the bonds issued in part (d), $3,000 is used to purchase land for future expansion
||Because of warranty claims, finished goods inventories costing $200 is sent to customers to replace defective products
||The company borrwed $12,000 for 4 months at a 10% (annual) interest rate) from a bank. The bank made the loan on a discount basis
||A long-term bond with principal of $25,000 will become due within the current year
||At the end of the month, the company recognizes its rent obligation of $4000 which it has not yet paid.
||In the next month the company pays both the current month s rent of $4000 and pays the previous month s rent which it had accrued
- Bonds payable calculate issue price and bond discount
On January 01, 2009 Roberts Inc. issued $2 million face amount of 10-year 10% coupon rate bonds when market interest rates were 12%. The bonds pay interest annually and mature on Dec. 31, 2018.
- Using the present value tables the appendix at the end of the book or your calculators), calculate the proceeds (issue price) of Drennen s bonds on January 1, 2009, assuming that the bonds were sold to provide a market rate of return to the investor
- Show the accounting entry for the issuance of the bonds.
- What is the annual interest expense?
- Show the accounting entry for this payment.
- Common stock balance sheet disclosure
The balance sheet caption for common stock is the following:
|Common stock, $5 par value, 2,000,000 shares authorized, 1,400,000 shares issued, 1,250,000 shares outstanding
- Calculate the dollar amount that will appear in the caption above.
- Calculate the total amount of a cash dividend of $0.15 per share.
- What accounts for the difference between the issued shares and outstanding shares
- Calculate Earned Revenues
Big Blue University has a fiscal year that ends on June 30. 2009 Summer Session of the university runs seven weeks from June 9 through July 28. Total tuition paid by students for the summer session amount to $1.4 million.
- How much revenue should be reflected in fiscal year ended June 30, 2009? Explain your answer (Hint: Calculate the number of weeks or days & the proportion before June 30)
- Would your answer to Part A be any different if the university had a tuition refund policy that no tuition would be refunded after the end of the third week of the summer session classes Explain your answer.
- Calculate Operating Income and Net Income
The following information is available from the accounting records of Monofill Inc. the year ended December 31, 2009:
|Net cash provided by financing activities
|Extraordinary loss from flood, net of tax savings of $35,000
|Income tax expense
|Cost of goods sold
|General and administrative expenses
- Calculate the operating income for the company
- Calculate the company s net income for the year
- Cash flows from operating, investing and financing activities direct method
The following information is available from Moonvessel Co. s accounting records of the year ended December 31, 2009 (amounts in millions):
|Cash dividends declared and paid
|Interest and taxes paid
|Collections from customers
|Repayment of long-term debt
|Purchase of land and buildings
|Cash paid to suppliers and employees
|Issuance of common stock
|Purchase of new delivery trucks
- Calculate the net cash provided (used) by operating activities for the company for the year
- Calculate the net cash provided [used] by investing activities
- Calculate the net cash provided (used) by financing activities
- Calculate the net increase (decrease) in cash for the year
- Operating income versus net income
If you were interested in evaluating the profitability of a company and could have only limited historical data, which you prefer to know the company s operating income or net income for the past 5 years Explain your answer.
- Accrual to cash flows
For each of the following items, calculate the cash and sources for cash uses that should be recognized on the statement of cash flows for Baldwin Co. for the year ended Dec. 31, 2009.
- Sales on account (all are collectible) amounted to $760,000, and accounts receivable decreased by $24,000. How much cash was collected from customers
- Income tax expense for the year was $148,000.00, and income taxes payable decreased by $34,000, how much cash was paid for income taxes
- Cost of goods sold amounted to $408,000, accounts payable increased by $19,000, and inventories increased by $14,000. How much cash was paid to suppliers
- The net book value of buildings increased by $240,000. No buildings were sold, and depreciation expense for the year was $190,000. How much cash was paid to purchase the buildings?
4. Circle-Square Ltd is in the process of liquidating and going out of business. When a company liquidates it sells all of its assets, realizing whatever cash it can, and pays off its liabilities. Any difference between the book value of the asset (or liability) and the amount of cash received (or paid) is recorded as a gain or loss which is reflected in the Owners Equity account.
At the date the firm decides to liquidate, its Balance Sheet shows $22,800 in cash, $114,200 in Accounts Receivable, $61,400 in Inventory, $265,000 in Plant & Equipment, and Total Liabilities of $305,600.
It is estimated that:
1) the inventory can be disposed of in a liquidation sale for 80% of its cost.
2) all but 5 % of the accounts receivable can be collected
3) plant and equipment can be sold for $190,000.
4) liabilities must be paid off in total.
||Set up the accounting equation and show the effects of the transactions described. Since total assets must equal total liabilities and owners equity, the unadjusted owners equity can be calculated by subtracting liabilities from the total of the assets given.
||+ Accounts Receivable
||+ Plant & Equipment
||+ Owners Equity
||Collection of Accts Receivable
||Sale of Plant & Equipment
||Payment of liabilities