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ACCOUNTING 450/550 Review Project

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Question;ACCOUNTING 450/550 Review Project;This is an individual;assignment. You may confer with one another, but remember;that conferring does not mean allowing others to just copy your work. Everyone should be working hard on this!;Part 1;Adjusting entries, 2012 adjusted trial balance and corrected 12/31/11;balance sheet.;Due: Tuesday 7/9/13?at the beginning of class. Part 2;Using the solution to part 1 which will be made available after part 1;is turned in on blackboard, you are to prepare the income statement, statement of stockholders? equity, statement of cash;flows, balance sheet, all in proper form;You have the option of preparing a statement of comprehensive income or;to incorporate that into the statement of stockholders? equity.;Both parts must be typed in 10 or 12 font.;NOTE: Important! Make a copy of your solution. The solution to the problem will be posted on;blackboard after you turn in the project.;Purpose of this;assignment;Review the adjustment/correction process including sophisticated;topics from accounting 350/351/352.Prepare all of the financial statements in proper form.;These are;foundational to this course and your career as accountants.;Setting;You have been hired by Dillard to prepare adjusting entries;and financial statements for 2012.;Previously Rinky Dink Accounting had been performing such tasks.;Ignore tax effects.;The trial balance at 12/31/12 before you work your magic and;the balance sheet at 12/31/11 are included in a separate excel file.;The;investments account at 12/31/12 contains stocks that were all purchased;during 2011. In discussions with;the CFO, you determine that they were made to invest excess cash. The company expects that they will need;the cash within the next year.;Here is information that you gather regarding that portfolio (in;000?s);Company;Initial Investment;Cost;Market Value at;12/31/11;Market Value at;12/31/12;DAG;$300;$330;$320;GLS;50;55;40;HRG;100;78;95;You also discuss with the CFO the Investment in Timberside;Corporation. You discover that this;Investment was first made 3 years ago on 1/1/10 and that the investment cost;was $700,000. The investment in 30% of;the voting stock of Timberside was made in order to be able to have;representation on its board since Timberside is a key supplier of the inventory;that Dillard sells. Dillard wants to;have a say in the quality control and other decisions that Timberside makes. You dig around and realize that the $700,000 investment cost was exactly equal to 30% of;the book value of equity of Timberside on 1/1/10. You also determine that Dillard has been;recording dividend revenue when it receives payment. During 2010, Dillard received $10,000 in;dividends, in 2011 $25,000 and are;$25,000 in 2012. Timberside has reported;income during 2010, 2011 and 2012 of $300,000, $350,000 and $330,000 respectively.;On 1/1/08, Dillard purchased 300, $1,000 face 8% Mickey;Mouse Corporation bonds, interest paid semi-annually on 7/1 and 12/31, with a maturity;term of 10 years. The purchase price was;$280,488.;You;discover that Dillard bought and installed equipment for $170,000 on;1/1/10. The equipment?s use will;result in environmental damage that will need to be cleaned up when the equipment;is retired. The estimated life of;the equipment is 10 years on 1/1/10.;The environmental clean-up cost is estimated to be $50,000. The $50,000 will all be paid at the end;of the equipment?s life. You notice;that the equipment was expensed when originally purchased. A discount rate of 6% is reasonable;discount rate for the clean-up cost.;Straight-line with no salvage value is appropriate.;The company uses the percentage of;accounts receivable method and historically does not collect 5% of its;ending accounts receivable.;The;company has been recording warranty expense as it has been paid. The company first warranted its;products, 4 years ago, beginning 1/1/09.;Warranty costs paid by year are listed below;Year;Warranty costs paid;2009;$7,000;2010;$10,000;2011;$12,000;2012;$11,000;After exploring the timing of sales during the year and what;seems like the company will pay given experience, you compute the following;warranty liabilities at each year ?end.;Original Sale year;Estimated liability on 12/31/09;Estimated liability on 12/31/10;Estimated liability on 12/31/11;Estimated liability at 12/31/12;2009;$4,000;$1,000;0;0;2010;9,000;$1,000;0;2011;7,000;$2,000;2012;4,000;Total;$4,000;$10,000;$8,000;$6,000;Additional;information: Dillard purchased equipment for $300,000 cash this year. This transaction was properly recorded.;You;discover that the reported ending inventory for 2010, 2011 and 2012 were;all wrong. This is first detected;by you this year. Inventory on;12/31/10 was understated by $50,000, on 12/31/11 understated by $80,000;and on 12/31/12 overstated by $90,000.;These appear to be independent errors.;The;10-year $400,000, 8% note payable was issued on 4/1/08 and pays interest;on 3/31 and 9/30 each year.;On;1/1/10, Dillard entered into a 5-year lease agreement for equipment. The equipment?s estimated life was 6;years. The 5 annual lease payments;are due on 12/31 each year except there were two payments the first year;on on 1/1 and one on 12/31. The lease payments are $10,000 each. Dillard guarantees a residual value of;$10,000. An incremental borrowing;rate of 7% would be appropriate.;2011 is the first year that Dillard had a;separate Treasury Stock account.

 

Paper#45071 | Written in 18-Jul-2015

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