Toronado Ltd. reported the following items in its unadjusted
trial balance as of 31 December 20X4 for the 20X4 fiscal year. This
trial balance is listed in alphabetical order. Note that this is a
partial trial balance and does not include all accounts. Accounts
have normal (debit or credit) balances.
| Administration expense | $ | 235,900 |
| Accounts payable | 77,000 | |
| Accounts receivable | 100,000 | |
| Allowance for doubtful accounts (credit) | 2,200 | |
| Cash dividends declared | 31,200 | |
| Freight-out (delivery to customers) | 27,100 | |
| Gain on sale of automobile | 1,600 | |
| Insurance expense | 38,880 | |
| Interest expense | 27,300 | |
| Loans receivable, 8% | 75,200 | |
| Merchandise inventory, 1 January | 89,600 | |
| Notes payable, 6% | 501,200 | |
| Purchases | 561,700 | |
| Salaries and employee benefits | 121,300 | |
| Sales returns and allowances | 42,300 | |
| Sales revenues | 1,885,000 | |
| Selling expense | 34,200 | |
| Supplies expense | 46,100 | |
| Supplies inventory | 800 | |
| Retained earnings, 1 January | 568,500 | |
| Unearned revenue | 32,200 | |
| Utilities expense | 65,600 | |
Other information:
• The tax rate is 30%, but no tax has yet been recorded.
• Closing merchandise inventory is $76,700. Closing supplies
inventory is $1,500.
• The insurance expense represents a payment made on 1 May for a
24-month fire insurance policy.
• Customers owe $53,200 for goods delivered on 31 December; this
amount has not yet been recorded.
• All sales are on account, except those that are prepaid.
• Unearned revenue represents all customer deposits received during
the year. Of this
amount, 60% is still unearned at the end of the
year.
• Bad debt expense is to be recognized as 1% of total sales.
• Interest on the note payable was last paid and recorded on 31
October.
• The company owes $3,400 in utilities.
• Interest on the loan receivable has not been paid or recorded all
year.
Required:
1. Prepare journal entries to reflect the required adjustments.
(If no entry is required for a transaction/event, select
"No journal entry required" in the first account field.
Round "Bad debt expense" and "Income tax expense" to the
nearest
$100.)
a. Record the entry to close merchandise inventory.
b. Record the entry to close supplies inventory.
c. Record the prepaid insurance expense.
d. Record the sales on account.
e. Record the deposit received last year which relate to current year sales.
f. Record the bad debt expenses.
g. Record the interest payable.
h. Record the utilities expense.
i. Record the interest revenue.
j. Record the income tax expense.
2. Prepare an SCI based on the adjusted balances. (Do not
round your intermediate calculations.
3. Prepare a statement of changes in equity (for retained earnings
only) based on the adjusted balances.
In: Accounting
Windsor Park Dominica is owned and operated by a private company, Windees Ltd. You work as the Facilities Manager of the Park and the CEO of the company has asked you to evaluate whether Windees should embark on the expansion of the facility given there are plans by the Government to host Cricket World Cup in 2020. The project seeks to increase the number of seats by building four new box seating areas for VIPs and an additional 4,000 seats for the general public. Each box seating area is expected to generate $300,500 in incremental annual revenue, while each of the new seats for the general public will generate $2,500 in incremental annual revenue. The incremental expenses associated with the new boxes and seating will amount to 70 percent of the revenues. These expenses include hiring additional personnel to handle concessions, ushering, and security. The new construction will cost $15 million and will be fully depreciated (to a value of zero dollars) on a straight-line basis over the 5-year life of the project. The company will have to invest $1.5 million in additional working capital immediately, but the project will not require any other working capital investments during its life. This working capital will be recovered in the last year of the project. The company’s marginal tax rate is 15 percent.
A. What are the incremental cash flows from this project? In other words determine the free cash flow of the project over its life. (You may use the table below to work out this part of the problem)
| Years 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Capital Expenses | ||||||
| Working Capital | ||||||
| Revenue | ||||||
| Operating Expenses | ||||||
| EBITDA | ||||||
| D&A | ||||||
| EBIT | ||||||
| ×(1 - t) | ||||||
| net income | ||||||
| D&A | ||||||
| cash flow from operating | ||||||
| working capital | ||||||
| free cash flow |
B. What is the Net Present Value if the project is assessed at a discount rate of 15% and should the project be accepted and why?
C. What is the Internal Rate of Return of the project and should the project be accepted and why?
D. In addition to the above information, you were told that Windees Ltd. has 5,000 bonds issued and outstanding with a 7.0 percent coupon rate compounded semi-annually. These bonds have 7 years left to maturity and they currently sell for 92 percent of par value. The company has 100,000 shares issued and outstanding with a market value of $3.85 per share. The company’s stock has a beta of 1.20. The expected return on the market is 8.0 percent and the yield on the risk-free asset is currently 6.0 percent. The CEO would like to know a fair rate which can be used to assess its cost of capital. You have therefore been asked to calculate the WACC for Windees Ltd
In: Finance
On December 31, 2018, M Company held X Company bonds in its portfolio of available-for-sale securities. The bonds have a par value of $15,000, carry a 10% annual interest rate, mature in 2025, and had originally been purchased at par. The market value of the bonds at December 31, 2018 was $13,000. The December 31, 2018, balance sheet showed the following:
|
M Company |
|
Partial Balance Sheet |
|
December 31, 2018 |
|
1 |
Assets |
|
|
2 |
Investment in Available-for-Sale Securities |
$15,000.00 |
|
3 |
Less: Allowance for Change in Fair Value of Investment |
(2,000.00) |
|
4 |
$13,000.00 |
|
|
5 |
Shareholders’ Equity: |
|
|
6 |
Unrealized Holding Gain/Loss |
$(2,000.00) |
On January 1, 2019, M acquired bonds of Y Company with a par value of $16,000 for $16,200. The Y Company bonds carry an annual interest rate of 12% and mature on December 31, 2023. Additionally, M acquired Z Company bonds with a face value of 18,000 for $17,600. The Z Company bonds carry an 8% annual interest rate and mature on December 31, 2028. At the end of 2019, the respective market values of the bonds were: X, $14,000; Y, $17,000; and Z, $20,000. M classifies all of the debt securities as available-for-sale as it does not intend to hold them to maturity nor does it intend to actively buy and sell them. Assume that M uses the straight-line method to amortize any discounts or premiums.
Required:
| 1. | Prepare the journal entries necessary to record the purchase of the investments on January 1, 2019, the annual interest payments on December 31, 2019, and the adjusting entry needed on December 31, 2019. |
| 2. | What would M disclose on its December 31, 2019, balance sheet related to these investments? |
| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| M Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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In: Accounting
Q.
The inventory of Ahrsun Ventures Corporation was destroyed by fire on February 29, 2020. The following data is for the first two months of the year: Sales $51,000, Sales Returns and Allowances $1,000, Purchases $28,200; Freight-In $1,200; and Purchase Discounts $1,400. According to the financial statements at year-end December 31, 2019 the balance of Merchandise Inventory was $20,000. Ahrsun Ventures has a gross profit rate of 30% on net sales and uses the periodic method of inventory.
REQUIRED: Determine the merchandise lost by fire.
Q.
On March 31 2020 the adjusted year-end account balances of ABC Company were as follows:
|
Accounts Payable |
$16,250 |
Equipment |
$70,000 |
|
|
Accounts Receivable |
13,000 |
Interest Revenue |
2,200 |
|
|
Accumulated Depreciation |
12,000 |
Merchandise Inventory |
26,250 |
|
|
Depreciation Expense |
4,000 |
Rent and Utilities Expense |
38,500 |
|
|
Cash |
3,500 |
Salaries Expense |
118,000 |
|
|
Cost of Goods Sold |
299,850 |
Sales |
505,000 |
|
|
Rob Williams, Capital |
66,500 |
Sales Discounts |
13,850 |
|
|
Rob Williams, Withdrawals |
15,000 |
Required: Prepare, in good form, a classified Balance Sheet. ABC Company uses the perpetual inventory method.
Q.
The March 31, 2019 balance sheet of Kalakaua Corporation had Accounts Receivable of $525,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During the year ended March 31, 2020, the following transactions occurred: sales on account $1,550,000; sales returns & allowances, $120,000; collections from customers, $1,350,000; accounts written off $41,000; previously written off accounts of $5,000 were collected.
|
Date |
Account Titles and Explanations |
Debit |
Credit |
Assume that it is company policy to use the aging of receivables basis to estimate bad debt expense. It determines that uncollectible accounts are expected to be $38,400. What is the adjusting entry at March 31, 2020? Assume the March 31, 2020 balance of Accounts Receivable is $575,000 and Allowance for Doubtful Accounts has an existing balance of $3,000 (cr). (Show calculations)
|
Date |
Account Titles and Explanations |
Debit |
Credit |
Q. The following figures are provided for Hanauma Marketing Corp. What is gross margin?
Sales revenue $480,000
Cost of goods sold 300,000
Sales discounts 20,000
Sales returns and allowances 15,000
Operating expenses 85,000
Interest revenue 5,000
a) $105,000
b) $140,000
c) $145,000
d) $ 90,000
e) $180,000
In: Accounting
The stockholders’ equity accounts of Tamarisk, Inc. on January
1, 2019, were as follows.
| Preferred Stock (8%, $52 par, cumulative, 10,000 shares authorized) | $ 390,000 | |
| Common Stock ($1 stated value, 2,000,000 shares authorized) | 1,300,000 | |
| Paid-in Capital in Excess of Par—Preferred Stock | 105,000 | |
| Paid-in Capital in Excess of Stated Value—Common Stock | 1,500,000 | |
| Retained Earnings | 1,800,000 | |
| Treasury Stock (11,000 common shares) | 44,000 |
During 2019, the corporation had the following transactions and
events pertaining to its stockholders’ equity.
| Feb. | 1 | Issued 24,000 shares of common stock for $124,000. | |
| Apr. | 14 | Sold 5,500 shares of treasury stock—common for $33,400. | |
| Sept. | 3 | Issued 4,900 shares of common stock for a patent valued at $34,000. | |
| Nov. | 10 | Purchased 1,100 shares of common stock for the treasury at a cost of $6,100. | |
| Dec. | 31 | Determined that net income for the year was $435,000. |
No dividends were declared during the year.
1. Journalize the transactions and the closing entry for net income
2. Enter the beginning balances in the accounts, and post the
journal entries to the stockholders’ equity accounts
3. Prepare a stockholders’ equity section at December
31, 2019, including the disclosure of the preferred dividends in
arrears
Account titles:
Accounts Payable
Accounts Receivable
Accumulated Depreciation
Accumulated Depreciation-Buildings
Accumulated Depreciation-Equipment
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Loss
Allowance for Doubtful Accounts
Bad Debt Expense
Buildings
Cash
Cash Dividends
Common Dividends Payable
Common Stock
Common Stock Dividends Distributable
Cost of Goods Sold
Depreciation Expense
Dividends
Dividends Payable
Equipment
Gain on Sale of Stock
Income Summary
Income Tax Expense
Income Tax Payable
Insurance Expense
Interest Expense
Interest Payable
Inventory
Land
Loss on Disposal of Plant Assets
No Entry
Notes Payable
Operating Expenses
Organization Expense
Other Operating Expenses
Paid-in Capital from Treasury Stock
Paid-in Capital in Excess of Par-Common Stock
Paid-in Capital in Excess of Par-Preferred Stock
Paid-in Capital in Excess of Stated Value-Common Stock
Patents
Preferred Dividends Payable
Preferred Stock
Prepaid Expenses
Prepaid Insurance
Professional Fees
Retained Earnings
Salaries and Wages Expense
Salaries and Wages Payable
Sales Revenue
Service Revenue
Stock Dividends
Supplies
Supplies Expense
Treasury Stock
Unearned Service Revenue
Utilities Expense
In: Accounting
The following unadjusted trial balance was extracted from the books of Carol’s Trading Company at December 31, 2017, the end of the company’s fiscal year. The company is owned by Carol Williams who trades in the business of buying and selling household consumables.
Carol’s Trading Company
Trial Balance as at December 31, 2017
|
A/C Name |
DR $ |
CR $ |
|
Cash |
250,000 |
|
|
Accounts Receivable |
340,000 |
|
|
Allowance for Bad Debts |
25,000 |
|
|
Merchandise Inventory |
210,000 |
|
|
Store Supplies |
120,000 |
|
|
Prepaid Insurance |
156,000 |
|
|
Office Furniture |
1,200,000 |
|
|
Accumulated Depreciation –Office Furniture |
360,000 |
|
|
Computer Equipment |
600,000 |
|
|
Accumulated Depreciation –Computer Equipment |
||
|
Accounts Payable |
345,000 |
|
|
Wages Payable |
||
|
Interest Payable |
||
|
Notes Payable, Long Term |
210,000 |
|
|
Unearned Sales Revenue |
265,000 |
|
|
Carol Williams, Capital |
855,200 |
|
|
Carol Williams, Withdrawal |
190,000 |
|
|
Sales Revenue Earned |
2,100,000 |
|
|
Sales Discount |
15,000 |
|
|
Sales Return and Allowances |
27,000 |
|
|
Cost of Goods Sold |
490,000 |
|
|
Wages Expense |
137,000 |
|
|
Insurance Expense |
78,000 |
|
|
Depreciation Expense –Office Furniture |
||
|
Depreciation Expense –Computer Equipment |
||
|
Store Supplies Expense |
||
|
Utilities Expense |
119,000 |
|
|
Bad Debt Expense |
||
|
Rent Expense |
205,000 |
|
|
Interest Expense |
23,200 |
__________ |
|
Total |
4,160,200 |
4,160,200 |
The following additional information was made available at December 31, 2017:
Store supplies on hand at December 31, 2017 amounted to $42,000.
Insurance of $156,000 was paid on June 1, 2017 for the period June 2017 to March 2018.
The office furniture has an estimated life of ten (10) years and is being depreciated on the straight-line method of depreciation, down to a residual value of $0.
The computer equipment was acquired on April 1, 2017 and is being depreciated over five (5) years on the double-declining method of deprecation, down to a residue of $54,432.
Wages earned by the company’s employees and not paid at December 31, 2017 amounted to $33,500.
Accrued interest expense amounted to $2,850 at December 31, 2017.
A physical count of inventory at December 31, 2017, reveals $280,300 worth of inventory on hand.
At December 31, 2017, $195,000 of the previously unearned sales revenue had been earned.
The aging of the accounts receivable schedule at December 31, 2017 indicated that the estimated uncollectible on accounts receivable is $34,000.
Other data:
$110,000 of the notes payable is due for payment on April 31, 2018
Required:
Prepare the necessary adjusting entries on December 31, 2017.
Prepare the company’s multiple-step income statement for the year ended December 31, 2017.
Prepare the company’s statement of owner’s equity for the year ended December 31, 2017.
Prepare the company’s classified balance sheet at December 31, 2017.
In: Accounting
William is a restaurant owner. He has 5 restaurants in Virginia, Maryland and DC. He is going through an extremely tough time due to Coronavirus crisis.
He had to shut down his restaurants, as ordered by
authorities.
His restaurants are allowed to serve “take away” orders, however
the revenue is very low to cover his costs.
William’s restaurants are located within a 45 minutes radius. Financial information is shown below;
|
Restaurant |
Locations |
|
1 |
DC- Business Distric |
| 2 | Bethesda |
| 3 | Arlington |
| 4 | National Harbor |
| 5 | Tysons Corner |
A typical Profit & Loss Statement of one of his restaurants, before the crisis, is shown below;
| Sales |
1,430,000 |
100.00% |
|
Cost of Goods Sold |
490,000 |
34.27% |
|
Gross profit |
940,000 |
65.73% |
|
Labor |
312,000 |
21.82% |
|
Rent |
130,000 |
9.09% |
|
Other expenses |
212,000 |
14.93% |
|
Profit Before Tax |
286,000 |
20.00% |
Before the crisis, monthly revenue per restaurant was around $120,000. Now, with take-out only, revenue is down to $10,000 per month per restaurant.
William is aware that his business is rapidly burning cash and he will run out of cash in about 3 months.
William is still very young, therefore retiring or selling the business is not an option for him.
William needs help to make tough decisions. He has heard about you, a bright business professional and you agreed to consult him.
Your Task
Your task is to help William to take the following decisions.
Please provide an answer to each of them and explain why.
1. Should William close restaurants? If yes, for how long? And what should he do after that? Why?
If not, should he continue take away only? Why?
2. Before the crisis, the fair market value for each of his restaurants would be about $1 million. An investor, who is trying to make advantage of the crisis, offered to buy his restaurant in DC for only $100,000.
Would you recommend William to sell or not? Why?
3. Just before the crisis, William was making expansion plans. He was about to sign a lease agreement for a new restaurant near Tysons Corner, which is a booming area with many residential units being developed. It is almost certain, in 2 years’ time, this area will be a hot spot for a restaurant.
Should William sign the lease agreement? What should he do? Why?
4.William is aware if does nothing, he will run out of cash in 3 months. What actions should he immediately take? List your recommendations.
Think as if this is your family business.
Your answers should include numbers.
In: Finance
Comprehensive Set of Transactions . The City of Lynnwood was recently incorporated and had the following transactions for the fiscal year ended December 31, 2017.
· The city council adopted a General Fund budget for the fiscal year. Revenues were estimated at $3,000,000 and appropriations were $2,990,000.
· Property taxes in the amount of $2,000,000 were levied. It is estimated that $8,000 of the taxes levied will be uncollectible.
· A General Fund transfer of $30,000 in cash and $300,000 in equipment (with accumulated depreciation of $65,000) was made to establish a central duplicating internal service fund.
· A citizen of Lynnwood donated marketable securities with a fair value of $900,000. The donated resources are to be maintained in perpetuity with the city using the revenue generated by the donation to finance an after school program for children, which is sponsored by the parks and recreation function. Revenue earned and received as of December 31, 2017, was $45,000.
· The city\'s utility fund billed the city\'s General Fund $125,000 for water and sewage services. As of December 31, the General Fund had paid $124,000 of the amount billed.
· The central duplicating fund purchased $4,500 in supplies.
· Cash collections recorded by the general government function during the year were as follows:
| Property taxes | $1,925,000 |
| Licenses and permits | 35,000 |
| User charges | 28,000 |
· During the year the internal service fund billed the city\'s general government function $15,700 for duplicating services and it billed the city\'s utility fund $8,100 for services.
· The city council decided to build a city hall at an estimated cost of $5,000,000. To finance the construction, 6 percent bonds were sold at the face value of $5,000,000. A contract for $4,500,000 has been signed for the project; how- ever no expenditures have been incurred as of December 31, 2017.
· The general government function issued a purchase order for $32,000 for computer equipment. When the equipment was received, a voucher for $31,900 was approved for payment and payment was made.
Using this information, prepare all journal entries to properly record each transaction for the fiscal year ended December 31, 2017. Use the following funds and government-wide activities, as necessary:
| General Fund | GF |
| Capital projects fund | CPF |
| Internal service fund | ISF |
| Permanent fund | PF |
| After School Fund (a special revenue fund) | SRF |
| Enterprise fund | EF |
| Governmental activities | GA |
Each journal entry should be numbered to correspond with each transaction. Do not prepare closing entries.
Your answer sheet should be organized as follows:
| Transaction Number | Fund or Activity | Account Title | Amounts |
| Debits | Credits |
In: Computer Science
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt securities (all of which were acquired at par value):
|
Security |
Cost |
1/1/2018 Fair Value |
| A | $20,000 | $25,000 |
| B | 30,000 | 29,000 |
| Totals | $50,000 | $54,000 |
During 2018, the following transactions occurred:
| May 3 | Purchased C debt securities at their par value for $50,000. |
| July 1 | Sold all of the A securities for $25,000 plus interest of $1,000. |
| Dec. 31 | Received interest of $7,600 on the B and C securities. Additionally the following information was available: |
|
Security |
12/31/18 Fair Value |
| B | $29,000 |
| C | 52,500 |
Required:
| 1. | Prepare journal entries to record the preceding information. |
| 2. | What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2018? |
| 3. | Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for available-for-sale securities? |
Chart of Accounts
| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ace Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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General Journal
Shaded cells have feedback.
Prepare journal entries to record the 2018 transactions. Additional Instructions
How does grading work?
PAGE 1
GENERAL JOURNAL
Score: 108/150
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
|
1 |
✔ |
✔ |
✔ |
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|
2 |
✔ |
✔ |
|||
|
3 |
✔ |
||||
|
4 |
✔ |
✔ |
|||
|
5 |
✔ |
||||
|
6 |
✔ |
✔ |
|||
|
7 |
✔ |
✔ |
|||
|
8 |
✔ |
||||
|
9 |
✔ |
||||
|
10 |
|||||
|
11 |
|||||
|
12 |
✔ |
What is the balance in the Unrealized Holding Gain/Loss account on December 31, 2018?
In: Accounting
The following independent events for Repertory Theatre Ltd. during the year ended December 31 2018, require a transaction journal entry or an adjusting journal entry, or both. The company adjusts its accounts annually.
1. Supplies on hand amounted to $1,500 at the beginning of the year. On March 1, additional supplies were purchased for $4,250 cash. At the end of the year, a physical count showed that supplies on hand amounted to $1,000.
2. The theatre owns a vehicle that was purchased on January 2 2018, for $120,000. The vehicle's estimated useful life is 4 years.
3. The theatre has nine plays each season, which starts in September 2018 and ends in May 2019 (one play per month). Season tickets sell for $360. On August 2, 600 season tickets were sold for the upcoming 2018-2019 season. The theatre credited Unearned Revenue for the full amount received on August 2 and uses a Ticket Revenue account to record revenue earned from season tickets.
4. On June 1, the theatre borrowed $30,000 from La Caisse Populaire Desjardins at an interest rate of 6%, to be repaid in one year. The interest is payable on the first day of each following month, and was last paid on December 1.
5. The total weekly payroll is $9,000, paid every Friday for employee salaries earned during the prior six-day workweek (Saturday - Thursday). This year, December 31 falls on Monday. Salaries were last paid (and recorded) on Friday, December 28 and will be paid next Friday, January 4.
6. Repertory Theatre rents a portion of its facilities for $600 a month to a local seniors' choir that uses the space for rehearsals. The choir's treasurer was ill during December, and on January.
7. the theatre receives a $1,200 cheque for both the amount owing for the month of December and the rent for the month of January. 7. Upon reviewing its books on December 31, the theatre noted that a telephone bill for the next month of December had not yet been received. A call to Bell Aliant determined that the telephone bill was for $1,125. The bill was paid on January 11. (Hint: use the Utilities Expense account for telephone services)
a) Prepare the journal entries to record the original transactions for items 1,2,3 and 4.
b) Prepare the year-end adjusting entries required for items 1 through 7 on December 31.
c) Record the subsequent cash transactions in January for (1) the interest paid on January 1 (item 4), (2) payment payroll on January 4 (item 5), (3) receipt of the rent on January 7 (item 6), and (4) payment of the telephone bill on January 11 (item 7)
In: Accounting