Question;Problem 7-26;The following transactions apply to Artesia Co. for 2012, its first;year of operations.;1. Received $40,000 cash from the issue of a short-term note with a;5 percent interest rate and a one-year maturity. The note was issued on April;1, 2012.;2. Received $120,000 cash plus applicable sales tax from performing;services. The services are subject to a sales tax rate of 6 percent.;3. Paid $72,000 cash for other operating expenses during the year.;4. Paid the sales tax due on $100,000 of the service revenue for the;year. Sales tax on the balance of the revenue is not due until 2013.;5. Recognized the accrued interest at December 31, 2012.;The following transactions apply to Artesia Co. for 2013.;1. Paid the balance of the sales tax due for 2012.;2. Received $145,000 cash plus applicable sales tax from performing;services. The services are subject to a sales tax rate of 6 percent.;3. Repaid the principal of the note and applicable interest on April;1, 2013.;4. Paid $85,000 of other operating expenses during the year.;5. Paid the sales tax due on $120,000 of the service revenue. The;sales tax on the balance of the revenue is not due until 2014.;Required;a. Organize the transaction data in accounts under an accounting;equation.;b. Prepare an income statement, a statement of changes in;stockholders? equity, a balance sheet, and a statement of cash flow for 2012;and 2013.ProblemNorman Co. borrowed $15,000 from the local bank on April 1, 2012;when the company was started. The note had an 8 percent annual interest rate;and a one-year term to maturity. Norman Co. recognized $42,000 of revenue on;account in 2012 and $56,000 of revenue on account in 2013. Cash collections;from accounts receivable were $38,000 in 2012 and $58,000 in 2013.;Norman Co. paid $26,000 of salaries expense in 2012 and $32,000 of;salaries expense in 2013. Norman Co. paid the loan and interest at the maturity;date.;Required;a. Organize the information in accounts under an accounting equation.;b. What amount of net cash flow from operating activities would be;reported on the 2012 cash flow statement?;c. What amount of interest expense would be reported on the 2012;income statement?;d. What amount of total liabilities would be reported on the December;31, 2012, balance sheet?;e. What amount of retained earnings would be reported on the;December 31, 2012, balance sheet?;f. What amount of cash flow from financing activities would be;reported on the 2012 statement of cash flows?;g. What amount of interest expense would be reported on the 2013;income statement?;h. What amount of cash flows from operating activities would be;reported on the 2013 cash flow statement?;i. What amount of assets would be reported on the December 31, 2013;balance sheet?;ProblemThe following selected transactions were taken from the books of;Caledonia Company for 2012.;1. On March 1, 2012, borrowed $50,000 cash from the local bank. The;note had a 6 percent interest rate and was due on September 1, 2012.;2. Cash sales for the year amounted to $225,000 plus sales tax at;the rate of 7 percent.;3. Caledonia provides a 90-day;warranty on the merchandise sold. The warranty expense is estimated to be 2;percent of sales.;4. Paid the sales tax to the state sales tax agency on $190,000 of;the sales.;5. Paid the note due on September 1 and the related interest.;6. On October 1, 2012, borrowed $40,000 cash from the local bank.;The note had a 7 percent interest rate and a one-year term to maturity.;7. Paid $3,600 in warranty repairs.;8. A customer has fi led a lawsuit against Caledonia;for $100,000 for breach of contract. The company attorney does not believe the;suit has merit.;Required;a. Answer the following questions;(1) What amount of cash did Caledonia;pay for interest during the year?;(2) What amount of interest expense is reported on Caledonia?s;income statement for the year?;(3) What is the amount of warranty expense for the year?;b. Prepare the current liabilities section of the balance sheet at;December 31, 2012.;c. Show the effect of these transactions on the financial statements;using a horizontal statements model like the one shown here. Use a + to;indicate increase, a ? for decrease, and NA for not affected. In the Cash Flow;column, indicate whether the item is an operating activity (OA), investing;activity (IA), or financing activity (FA). The first transaction is recorded as;an example..:.
Paper#43984 | Written in 18-Jul-2015Price : $31