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Question;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 not also be shown as affecting owners? equity.;a.;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.;b.;At the end of December the;company accrues the interest that is payable on the bonds issued in (a).;c.;On Feb. 1 the company pays the;interest on the bonds;d.;Bonds payable with a face amount of $5,000 are;issued at a price of 99 (That means at 99% of par value);e.;Of the proceeds from the bonds;issued in (d), $3,000 is used to purchase land for future expansion;f.;Because of warranty claims;finished goods inventories costing $200 is sent to customers to replace;defective products;g.;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.;h.;A long-term bond with principal;of $25,000 will become due within the current year.;i.;At the end of the month, the;company recognizes its rent obligation of $4000 which it has not yet paid.;j.;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.;1;Assets;Liabilities;Transaction /;Adjustment;Current Asset;Noncurrent Asset;Current Liability;Noncurrent Liability;Owners Equity;Net Income;a.;Bonds payable;with a face amount of $15,000 are issued at par.;Cash + 15,000;Bonds Payable;+15,000;b.;At the end of;December the company accrues the interest that is payable on the bonds issued;in (a);c.;On Feb. 1 the;company pays the interest on the bonds;d;Bonds payable;with a face amount of $5,000 are issued at a price of 99.;e;Of the proceeds;from the bonds issued in part (d), $3,000 is used to purchase land for future;expansion;f;Because of;warranty claims, finished goods inventories costing $200 is sent to customers;to replace defective products;g;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;h;A long-term bond;with principal of $25,000 will become;due within the current year;i;At the end of;the month, the company recognizes its rent obligation of $4000 which it has;not yet paid.;j;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.;a.;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;b.;Show the accounting entry for;the issuance of the bonds.;c.;What is the annual interest;expense?;d.;Show the accounting entry for;this payment.;b.;Assets;Liabilities;Owners?;Equity;Net;Income;Revenues;Expenses;Debit;Credit;d.;Assets;Liabilities;Owners?;Equity;Net;Income;Revenues;Expenses;Debit;Credit;Common stock balance sheet disclosure;The balance sheet caption for common stock;is the following;Common stock, $5 par value, 2,000,000;shares authorized, 1,400,000 shares issued, 1,250,000 shares outstanding;$???;a.;Calculate the dollar amount that;will appear in the caption above.;b.;Calculate the total amount of a;cash dividend of $0.15 per share.;c.;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.;a.;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);b.;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;$127,000;Dividends paid;28,000;Extraordinary loss from flood, net of tax;savings of $35,000;135,000;Income tax expense;16,000;Depreciation;31,000;Interest Expense;12,500;Net sales;864,000;Advertising expense;25,000;Accounts receivable;77,000;Cost of goods sold;559,000;General and administrative expenses;183,000;a.;Calculate the operating income;for the company;b.;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;$340;Interest and taxes paid;110;Collections from customers;1,530;Net Income;120;Repayment of long-term debt;320;Purchase of land and buildings;70;Cash paid to suppliers and employees;1230;Depreciation;70;Issuance of common stock;400;Purchase of new delivery trucks;80;a.;Calculate the net cash provided;(used) by operating activities for the company for the year;b.;Calculate the net cash provided;[used] by investing activities;c.;Calculate the net cash provided;(used) by financing activities;d.;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.;a.;Sales on account (all are;collectible) amounted to $760,000, and accounts receivable decreased by;$24,000. How much cash was collected;from customers?;b.;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?;c.;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?;d.;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.;6;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.;Item;Cash;+ Accounts;Receivable;+Inventory;+ Plant;Equipment;- Liabilities;+ Owners? Equity;a;Starting;Position;22800;+114200;+61400;+265000;= 305600;+157800;b;Collection of;Accts Receivable;c;Inventory;liquidation;d;Sale of Plant;Equipment;e;Payment of;liabilities;f;Balance

 

Paper#38302 | Written in 18-Jul-2015

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