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ACTP 5006 Worksheet 2: Problem A - Balance Sheet SnackTastics's Corp. makes and distributes snacks and beverages....




Question;Worksheet 2: Problem A - Balance SheetSnackTastics's Corp. makes and distributes snacks and beverages which are sold inkiosks at malls, entertainment venues and big-box stores. Below is a list of all of theiraccounts as of December 31, 2013:10% Bonds, 20-year bonds, due 12/31/2020Accounts PayableAccounts ReceivableAccumulated Amortization - PatentAccumulated Amortization - TrademarkAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAdditional Paid-in Capital - preferred stockAdditional Paid-in-Capital, common stockAdvertising ExpenseAllowance for Doubtful AccountsAmortization ExpenseBad Debt ExpenseBuildingCashCommon Stock ($5 par)Cost of Goods SoldDepreciation Expense (Building & Equipment)Discount on Bonds PayableDividend RevenueDividendsEquipmentIncome Tax ExpenseInterest ExpenseInterest RevenueInventoriesInvestment in Ferrari Corp stockInvestment in Sampson Corp stockInvestment in Durango Corp bondsLandLong-term Notes PayablePatentPreferred Stock, ($10 par)Rent ExpenseRetained Earnings800,00083,750352,40034,92034,650120,00060,00028,000150,00086,70015,2507,0309,7501,020,5001,354,600300,000129,85035,00073,0103,28055,000365,000242,903124,2688,490374,50041,25048,75051,500585,000677,50077,600100,00088,650?SalesShort-Term Notes PayableSupplies (office)Supplies ExpenseTrademarkUnrealized holding gain - equityUtilities ExpenseWages ExpenseWages Payable1,554,600336,87027,85047,75063,0003,35022,660255,64042,000Additional information:a. The building had a $220,500 salvage value and a 50 year useful life, however,SnackTastics, Inc. only expected to use the building for 40 years. The buildingwas purchased on Jan 1, 2008. SnackTastics uses the straight-line method fordepreciation purposes.b. The company had purchased 1,000 shares of Sampson Company stock threeyears ago for a total of $37.50 per share. They intended to hold the SampsonCompany stock for a while, although the exact holding period was undetermined.Non-Current Asset - Long Term Investmentc. SnackTastics Corp. purchased 10,000 shares of Ferrari Corp stock two weeksago for a total of $41,250. They expect to sell Ferrari Company stock as soon asit reaches $4.50 per share, which is expected to happen in the next two months.Short Term Investment ? Available for Saled. SnackTastics purchased the 10-year bonds of Durango Corp. last year. They planto hold them for two or three years, at which time they hope to sell them andmake a profit. Non-Current Asset - Long Term Investmente. Upon further evaluation, it was determined that $180,000 of the land was notbeing used in operations.f. SnackTastics Corp. had pledged $18,200 of Accounts Receivable as collateralagainst a $15,000 loan it obtained from First National Bank.g. The value of the inventories was determined using the lower of cost, using LIFO,or market.h. SnackTastics had $172,000 of inventory out on consignment with StadiumConcessions Corp.? Total Inventory = 374,500 + 172,000 = $546,500i. The interest expense includes interest on the bonds and notes payable,depreciation expense includes depreciation on both the building and equipmentand amortization expense includes amortization on both the Trademark andPatent.j. The company is authorized to issue 100,000 shares of common stock and25,000 shares of preferred stock. There have been no additional issuances ofstock, nor have there been any repurchases of stock since the initial issuance.k. The unrealized holding gain reported above pertains to the Available-for-Salesecurity(ies) and must be reported in the equity section of the Balance Sheet.You do not need to do a statement of comprehensive income for this problem.Required: (You MUST show all work to receive full credit)1. Prepare a classified balance sheet in good form, including all disclosures.Prepaid Expenses:Utilities Expense: 22,660Supplies Expense: 47,750Wages Expense: 255,640Advertising Expense: 86,700Rent Expense: 88,650Total Prepaid Expenses: $501,4002. What was the beginning Retained Earnings amount (as of December 31st,2012?) Hint: You need to find net income to solve for this.3. What is the difference between authorized, issued and outstanding shares ofstock?? Authorized shares are the number of stock units that a publicly tradedcompany can issue.? Issued shares of stock are the number of authorized shares that is sold toand held by the shareholders of a company. Issued shares include thestock that a company sells publicly in order to generate capital.? Outstanding shares are a company?s stock currently held by all itsshareholders, including share blocks held by institutional investors andrestricted shared owned by the company?s officers and insiders.4. What principle, constraint or assumption dictates that we record inventories atthe lower of cost or market?5. What is the company's current ratio? Show formula & answer.6. What are the NET assets of the business? Show formula & answer.Hints:Problem One:a) Separate the accounts into Income Statement, Retained Earnings and BalanceSheet accounts. (I usually highlight mine in different colors, but you are free touse whatever method works best for you).b) Determine the Accumulated Depreciation for the building before solving forending Retained Earnings.c) Remember, your Balance Sheet ?equation? is the same as the AccountingEquation.d) To solve for beginning Retained Earnings, you first need to solve for endingRetained Earnings and then work backwards.e) You will only need to adjust the balance in one balance sheet account and addone balance sheet account for this problem.f) See pages 218 and 221 of the loose leaf, 15 th edition of the text for help on howto classify the various Investments.g) Financial ratios can be found on page 246 of the loose-leaf, 15 th edition of thetext.Problem B: Statement of Cash Flows:Billingsley Company presented the following comparative financial data at December31, 2013:December 312013CashAccountsreceivableBuilding andEquipmentAccumulatedDepreciationTotal assetsAccountspayableDividendspayableCommon stockAdditional paidin capitalRetainedearningsTotal liabilitiesand stockholders'equity$10,0002012$91,000300,000260,000$341,000$2$55,000$42,000110,000160,00074,000$341,000$2Additional information for the year 2013:a. Equipment costing $80,000 was sold at a $1,000 gain and was 30 percentdepreciated at the time of saleb. Depreciation expense was recorded.c. Net income was $75,000.Required1. In good form, prepare the operating section of the statement of cash flows for2013 using the INDIRECT METHOD.2. Can a company have positive net income and negative cash flows or negativeincome and positive cash flows? Why or why not?Hints:Problem 2a) You are only dealing with the operating section of the Statement of Cash flows forthis problem, so concentrate on the accounts that affect that section.b) Do a T-account for Equipment and one for the Accumulated Depreciationaccounts to help determine the depreciation expense for the period.c) Question 2 was covered in chat, so be sure to review the archive if you missed it.


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