Question

Assume cash transaction in year X1 unless otherwise noted.

1/1       An Investor acquired 100% of Crazy’s stock with an investment of $800,000 cash. Par value of stock was 20.00/share and a thousand shares were sold

1/1       Crazy borrowed $250,000 cash by issuing a 3-year note with a stated interest rate of 8% per year. To be compounded annually. The interest will be paid on January 1 of each year (starting next year); and the principal will be paid on maturity

1/1       Prepaid three years of rent for $48,000 (cash).

1/15     Purchased office equipment for $50,000 and supplies for $31,000

2/7       Received $180,000 cash for consulting, services to be performed in the future for client “X”

3/1       Started up a second line of consulting services. Sold and received $300,000 in total for the year in consulting services and paid related misc. expenses of $350,000. This summarizes all revenues and expense of business #2. All in cash.   Purchased a machine for business 2 for $40,000 cash.

7/1       Prepaid $48,000 cash for a 12-month insurance policy (starting on 7/1)

8/1       Borrowed a $300,000 in cash from bank. Stated rate of interest is 6%. Principal and interest due 7/31/x2

9/12     Purchased $15,000 more of supplies on credit

9/16     Provided consulting services of $60,000 on credit to client “Y” from the main (first line) consulting service division.

10/1     Purchased $18,000 (with cash) of an investment in another company’s (Pear Inc.) stock. Purchased $25,000 in bonds of Pear (not considered trading)

10/20   Collected $5,000 from client “Y”.  

10/21   Delivered $150,000 for services delivered to Client “ZA” on account.

10/31   80% of the services for client X are performed.   

12/1     Decided to sell second line of consulting business. Found a buyer for second line of consulting services. Sold the business in exchange for $20,000 cash, the business and the machine (3/1) was sold. This resulted in a loss of $20,000.    

12/15 Paid down the payable (supplies) with a $5,000 cash payment. We received $100,000 cash from Client “ZA”.

12/31   Counted supplies and determined that $6,000 of supplies were still on hand

12/31   Total salaries paid in year equaled $45,000. Remaining salaries are to be paid on 1/3/x2. The total amount of current year expense is $65,000.

12/31   Determined appropriate total depreciation is $10,000

12/31   Determined that the stock purchased on 10/1 was now worth $16,000. However, the stock was not sold. Determined the bonds were worth 12,000.

12/31   We declared and paid a dividend of $15,000 to our investor

12/31   We received cash of $3,000 in dividends from Pear Inc. We received $1,000 in interest from bonds.

Tax Rate is 21% (none of the tax is paid, but it is accrued as a liability)

1. Prepare Balance Sheet in good form for 12/31/X1.

Answer 1