Question
In: Accounting
The current market values of the assets of both businesses are as follows. Description Cash Accounts...
The current market values of the assets of both businesses are
as follows.
Description
Cash
Accounts receivable Merchandise inventory Equipment
Curtis’ Coffee
$ 7,500 100 450
2,500
$10,550
Cookie Creations
$12,000 500 1,130 1,000
$14,630
Continuing Cookie Chronicle 1
Curtis and Natalie meet with a lawyer and form their
corporation, called Cookie & Coffee Creations Inc., on November
1, 2018. The new corporation is authorized to issue 50,000 shares
of $1 par common stock and 10,000 shares of no par, $6 cumulative
preferred stock.
The assets held by each business will be transferred into the
corporation at current market value of $1 per share. Curtis will
receive 10,550 common shares, and Natalie will receive 14,630
common shares in the corporation.
Natalie and Curtis are very excited about this new business
venture. They come to you with the following questions.
1. Curtis’ dad and Natalie’s grandmother are interested in
investing $5,000 each in the new business venture. Curtis and
Natalie are considering issuing them preferred shares. What would
be the advantage of issuing them preferred stock instead of
common?
2. What would be the advantages and disadvantages of issuing
cumulative preferred?
3. “Our lawyer sent us a bill for $750. When we talked the
bill over with her, she said she would be willing to receive common
stock in our corporation instead of cash. We would be happy to
issue her stock, but we’re worried about accounting for this
transaction. Can we do this? If so, how do we determine how many
shares to give her?”
Instructions: Part 1
(a) Answer Natalie and Curtis’ questions.
(b) Prepare the journal entries required on November 1, 2018,
the date when Natalie and Curtis transfer the assets of their
respective businesses into Cookie & Coffee Creations Inc.
(c) Assume that Cookie & Coffee Creations Inc. issues
1,000 $6 cumulative preferred shares to Curtis’ Dad and the same
number to Natalie’s grandmother, in both cases for $5,000. Also
assume that Cookie & Coffee Creations Inc. issues 750 common
shares to its lawyer. Prepare the journal entries required for each
of these transactions that also occurred on November 1.
(d) Prepare the opening balance sheet for Cookie & Coffee
Creations Inc. as of November 1, 2018, including the journal
entries in (b) and (c) above.
Part 2
After establishing their company’s fiscal year-end to be
October 31, Natalie and Curtis began operating Cookie & Coffee
Creations Inc. on November 1, 2018. The company had the following
selected transactions during its first fiscal year of
operations.
Jan. 1 June. 30
Oct. 15 Oct. 31
Issued an additional 800 preferred shares to Natalie’s brother
for $4,000 cash.
Repurchased 750 shares issued to the lawyer, for $500 cash.
The lawyer had decided to retire and wanted to liquidate all of her
assets.
The company had a very successful first year of operations and
as a result declared dividends of $28,000, payable November 15,
2019. (Indicate the amounts payable to the preferred stockholders
and to the common stockholders.)
The company earned revenues of $472,500 and incurred expenses
of $416,500 (including the $750 legal expense from November 1 but
excluding income tax).
Record income tax expense, assuming the company has a 20%
income tax rate.
Instructions: Part 2
(a) Prepare the journal entries to record each of the above
transactions.
(b) Prepare all of the closing entries required on October 31,
2019.
(c)PreparetheretainedearningsstatementfortheyearendedOctober31,2019.
(d) Prepare the stockholders’ equity section of the balance
sheet as of October 31, 2019.
Solutions
ekkarill92 answered 1 month agoRelated Solutions
Assets Current assets: Cash $  
Assets
Current assets:
Cash
$ 500,000
Marketable securities
100,000
Accounts receivable
$ 2,450,000
Less: Allowance for
bad debts
250,000
2,200,000
Inventory
5,400,000
Total current assets
$ 8,200,000
Fixed assets:
Plant and equipment, original cost
$ 31,300,000
Less: Accumulated
depreciation
13,100,000
Net plant and equipment
18,200,000
Total assets
$ 26,400,000
Liabilities and Owners’ Equity
Current liabilities:
Accounts payable
$ 5,800,000
Accrued expenses
...
The balance sheet for Bostick Corporation? follows: Ending balance Beginning balance ?Assets: Current? assets: Cash and...
The balance sheet for Bostick Corporation? follows:
Ending balance
Beginning balance
?Assets:
Current? assets:
Cash and cash equivalents
$52,600
?$44,600
Accounts receivable
$18,300
?$22,300
Inventory
$48,500
?$53,000
Total current assets
$119,400
?$119,900
?Property, plant, and equipment
?$287,800
?$275,300
Less accumulated depreciation
$109,000
?$101,550
Net? property, plant, and equipment
$178,800
?$173,750
Total assets
$298,200
?$293,650
Liabilities and? stockholders' equity:
Current? liabilities:
Accounts payable
?$26,030
?$29,580
Wages payable
?$41,600
?$47,100
Other accounts payable
$42,200
?$35,400
Notes payable
?$24,200
?$25,200
Total current liabilities...
The Balance Sheet of the Illini as of 12/31/20X0: Assets Current Assets: Cash 1,500,000 Accounts receivable,...
The Balance Sheet of the Illini as of
12/31/20X0:
Assets
Current Assets:
Cash 1,500,000
Accounts receivable, net 18,000
Inventory 50,000
Total current assets 1,568,000
Equipment 90,000
Goodwill 20,000
Total assets $1,678,000
Liabilities and shareholders' equity
Shareholders' equity:
Common stock, 20,000 shares outstanding, $1 par 20,000
Additional paid-in capital 280,000
Retained earnings 1,378,000
Total shareholders' equity 1,678,000
Total liabilities and shareholders' equity 1,678,000
Note that all additional paid-in capital (APIC) sub accounts
(e.g., APIC-options and APIC-treasury stock), if any, are tracked...
The Balance Sheet of the Illini as of 12/31/20X0: Assets Current Assets: Cash 1,500,000 Accounts receivable,...
The Balance Sheet of the Illini as of
12/31/20X0:
Assets
Current Assets:
Cash 1,500,000
Accounts receivable, net 18,000
Inventory 50,000
Total current assets 1,568,000
Equipment 90,000
Goodwill 20,000
Total assets $1,678,000
Liabilities and shareholders' equity
Shareholders' equity:
Common stock, 20,000 shares outstanding, $1 par 20,000
Additional paid-in capital 280,000
Retained earnings 1,378,000
Total shareholders' equity 1,678,000
Total liabilities and shareholders' equity 1,678,000
Note that all additional paid-in capital (APIC) sub accounts
(e.g., APIC-options and APIC-treasury stock), if any, are tracked...
Current assets Current liabilities Cash $72,000 Accounts payable $12,000 Accounts receivable 18,000 Interest payable 12,000 Interest...
Current assets
Current liabilities
Cash
$72,000
Accounts payable
$12,000
Accounts receivable
18,000
Interest payable
12,000
Interest receivable
1,000
Inventory
60,000
Total current assets
$151,000
Total current liabilities
$24,000
Long-term assets
Long-term liabilities
Equipment (net of depreciation)
$128,000
Note payable
100,000
Total long-term assets
$128,000
Total long-term liabilities
$100,000
Equity
Common stock
10,000
Paid-in capital
50,000
Retained earnings
95,000
Total equity
$155,000
Total assets
279,000
Total liabilities and equity
$279,000
Yes the difference between account payable and accounts
receivable is required....
Assuming current assets exceed current liabilities, determine the impact of reducing accounts payable using cash. A....
Assuming current assets exceed current liabilities, determine
the impact of reducing accounts payable using cash.
A. Increase the current ratio.
B. Decrease working capital.
C. Decrease the current ratio.
Assets Current assets Cash $ 21,000 $ 17,000 Marketable securities 21,000 7,000 Accounts receivable (net) 51,000...
Assets
Current assets
Cash
$
21,000
$
17,000
Marketable securities
21,000
7,000
Accounts receivable (net)
51,000
43,000
Inventories
136,000
144,000
Prepaid items
25,000
10,000
Total current assets
254,000
221,000
Investments
22,000
15,000
Plant (net)
260,000
245,000
Land
28,000
23,000
Total assets
$
564,000
$
504,000
Liabilities and Stockholders’
Equity
Liabilities
Current liabilities
Notes payable
$
24,600
$
8,300
Accounts payable
58,800
45,000
Salaries payable
25,000
19,000
Total current liabilities
108,400
72,300
Noncurrent liabilities
Bonds payable
140,000
140,000
Other
25,000
20,000...
Assets Current assets: Cash $7,170 Accounts payable 7,500 Supplies 2,590 Prepaid insurance 800 &n
Assets
Current assets:
Cash
$7,170
Accounts payable
7,500
Supplies
2,590
Prepaid insurance
800
Land
24,000
Total
current assets
$42,060
Property, plant, and equipment:
Building
$43,700
Equipment
29,250
Total property, plant, and
equipment
72,950
Total assets
$131,510
Liabilities
Current liabilities:
Accounts receivable
$10,000
Accum. depr.-building
12,525
Accum. depr.-equipment
7,340
Net income
11,500
Total
liabilities
$41,365
Owner's Equity
Wages payable
$1,500
Mark Brock, capital
88,645
Total owner's equity
90,145
Total
liabilities and owner's equity
$131,510
a. List the errors in the balance...
Assets Current assets: Cash $7,170 Accounts payable 7,500 Supplies 2,590 Prepaid insurance 800 &n
Assets
Current assets:
Cash
$7,170
Accounts payable
7,500
Supplies
2,590
Prepaid insurance
800
Land
24,000
Total
current assets
$42,060
Property, plant, and equipment:
Building
$43,700
Equipment
29,250
Total property, plant, and
equipment
72,950
Total assets
$131,510
Liabilities
Current liabilities:
Accounts receivable
$10,000
Accum. depr.-building
12,525
Accum. depr.-equipment
7,340
Net income
11,500
Total
liabilities
$41,365
Owner's Equity
Wages payable
$1,500
Mark Brock, capital
88,645
Total owner's equity
90,145
Total
liabilities and owner's equity
$131,510
a. List the errors in the balance...
Balance Sheet For the Year Ended December 31 Assets Current assets: Cash $7,170 Accounts payable 7,500...
Balance Sheet
For the Year Ended December 31
Assets
Current assets:
Cash $7,170
Accounts payable 7,500
Supplies 2,590
Prepaid insurance 800
Land 24,000
Total current assets $42,060
Property, plant, and equipment:
Building $43,700
Equipment 29,250
Total property, plant, and equipment 72,950
Total assets $131,510
Liabilities
Current liabilities:
Accounts receivable $10,000
Accum. depr.-building 12,525
Accum. depr.-equipment 7,340
Net income 11,500
Total liabilities $41,365
Owner's Equity
Wages payable $1,500
Mark Brock, capital 88,645
Total owner's equity 90,145
Total liabilities and owner's equity...
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