Question

In: Accounting

a. Chile Co. has 1,000 shares of 8%, $50 par value,cumulative preferred stock and 50,000...

a. Chile Co. has 1,000 shares of 8%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2016. In 2016, $10,000 of dividends are declared and paid. No dividends were paid in2015. What are the dividends received by the common stockholders in 2016?

b. The entry to record the full payment of the premium on a two-year insurance policy would be:

-debit to prepaid insurance, credit to accounts receivable

-debit to prepaid insurance, credit to cash

-debit to insurance expense, credit to cash

-debit to prepaid insurance, credit to accounts payable

c. JC, Inc. acquired a piece of machinery on January 3, 2016.

The following are the details on the machine:
Cost:   $68,400
Life: 100,000 units
Salvage (Residual) Value:    $11,600.

d. Acme Co. began the year with $4,200 in supplies and purchased $7,500 in supplies during the year. At the year end, $3,100 in supplied remained on hand. The required adjusting entry would be:

JC uses the units-of-production method of depreciation. Assuming the machine produced 18,500 units during the year ended December 31, 2016, the 2016 depreciation expense was:

-Debit, Supplies Expense for $3,100
Credit, Supplies for $3,100

-Debit, Supplies Expense for $8,600
Credit, Supplies for $8,600

-Debit, Supplies for $3,100
Credit, Cash for $3,100

-Debit, Supplies for $8,600
Credit, Accounts Payable for $8,600

Expert Solution

a.

Cumm. Pref. Shares are those shares whose dividend get collected till they are paid.

Pref. Dividend in 2015 = $4,000 {$8%* ($50* 1,000)}

Pref. Dividend in 2016 = $4,000

Dividend declared in 2016 = 10,000

Pref Dividend = $8,000 (4,000 + 4,000)

Equity Dividend = $2,000 (10,000 – 8,000)

b.

Prepaid Insurance (Dr.)

Cash (Cr.)

Option B is correct.

c.

Depreciation = (Cost – Salvage Value) / Total No. of Units produced in Life * Units produced in 2016

= (68,400 – 11,600) / 100,000 * 18,500 Units

Depreciation for 2016 = $10,508

d.

Supplies Expense = Opening + Purchased – Closing

= $4,200 + 7,500 – 3,100

Supplies Expense = $8,600

Entry:

Supplies Expense (Dr.) $8,600

Supplies (Cr.) $8,600

Option B is correct

ekkarill92 answered 2 years ago

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