Month of April
| Date | |
| April-01 | Acquired $55000 to establish the company, $33000 from an initial investment through the issue of common stock to themselves and $22000 from a bank loan by signing a note. The entire note is due in 5 years and has 7 per cent annual interest rate. Interest is payable in cash on March 31 of each year. |
| April-01 | Paid $4200 (represents 3 months) in advance rent for a one-year lease on kitchen space. |
| April-01 | Paid $35000 to purchase a refrigerator. The refrigerator is expected to have a useful life of 5 years and a salvage value of $5000 at the end of 5 years. |
| April-06 | Purchased supplies for $500 for cash. |
| April-09 | Received $700 cash as an advance payment from a client to be served in May. |
| April-10 | Recorded sale to customers. Cash receipts were $700 and invoices for sales on account were $1500. |
| April-15 | Paid $1460 cash for employee semi-monthly salaries. |
| April-16 | Collected $400 from accounts receivable. |
| April-23 | Received monthly utility bills amounting to $340. The bills are to be paid in May. |
| April-25 | Paid advertising expense for advertisements run during April, $260. |
| April-30 | Recorded services to customers . Cash receipts were $1300 and invoices for services on account were $1800. |
| April-30 | Paid $1460 cash for employer salaries |
Required:
1. Open general ledger accounts, using the T-accounts provided, and post the general journal entries to
the ledger for April.
2. Record and post the appropriate adjusting entries for April.
3. Prepare an adjusted trial balance for April.
4. Prepare a balance sheet for April.
In: Accounting
Month of April
| Date | |
| April-01 | Acquired $55000 to establish the company, $33000 from an initial investment through the issue of common stock to themselves and $22000 from a bank loan by signing a note. The entire note is due in 5 years and has 7 per cent annual interest rate. Interest is payable in cash on March 31 of each year. |
| April-01 | Paid $4200 (represents 3 months) in advance rent for a one-year lease on kitchen space. |
| April-01 | Paid $35000 to purchase a refrigerator. The refrigerator is expected to have a useful life of 5 years and a salvage value of $5000 at the end of 5 years. |
| April-06 | Purchased supplies for $500 for cash. |
| April-09 | Received $700 cash as an advance payment from a client to be served in May. |
| April-10 | Recorded sale to customers. Cash receipts were $700 and invoices for sales on account were $1500. |
| April-15 | Paid $1460 cash for employee semi-monthly salaries. |
| April-16 | Collected $400 from accounts receivable. |
| April-23 | Received monthly utility bills amounting to $340. The bills are to be paid in May. |
| April-25 | Paid advertising expense for advertisements run during April, $260. |
| April-30 | Recorded services to customers . Cash receipts were $1300 and invoices for services on account were $1800. |
| April-30 | Paid $1460 cash for employer salaries |
Required:
1. Open general ledger accounts, using the T-accounts provided, and post the general journal entries to
the ledger for April.
2. Record and post the appropriate adjusting entries for April.
3. Prepare an adjusted trial balance for April.
4. Prepare a balance sheet for April.
In: Accounting
Month of April
| Date | |
| April-01 | Acquired $55000 to establish the company, $33000 from an initial investment through the issue of common stock to themselves and $22000 from a bank loan by signing a note. The entire note is due in 5 years and has 7 per cent annual interest rate. Interest is payable in cash on March 31 of each year. |
| April-01 | Paid $4200 (represents 3 months) in advance rent for a one-year lease on kitchen space. |
| April-01 | Paid $35000 to purchase a refrigerator. The refrigerator is expected to have a useful life of 5 years and a salvage value of $5000 at the end of 5 years. |
| April-06 | Purchased supplies for $500 for cash. |
| April-09 | Received $700 cash as an advance payment from a client to be served in May. |
| April-10 | Recorded sale to customers. Cash receipts were $700 and invoices for sales on account were $1500. |
| April-15 | Paid $1460 cash for employee semi-monthly salaries. |
| April-16 | Collected $400 from accounts receivable. |
| April-23 | Received monthly utility bills amounting to $340. The bills are to be paid in May. |
| April-25 | Paid advertising expense for advertisements run during April, $260. |
| April-30 | Recorded services to customers . Cash receipts were $1300 and invoices for services on account were $1800. |
| April-30 | Paid $1460 cash for employer salaries |
Required:
1. Prepare an adjusted trial balance for the month of April.
2. Prepare an income statement, statement of retained earnings, and balance sheet for April.
In: Accounting
Month of April
| Date | |
| April-01 | Acquired $55000 to establish the company, $33000 from an initial investment through the issue of common stock to themselves and $22000 from a bank loan by signing a note. The entire note is due in 5 years and has 7 per cent annual interest rate. Interest is payable in cash on March 31 of each year. |
| April-01 | Paid $4200 (represents 3 months) in advance rent for a one-year lease on kitchen space. |
| April-01 | Paid $35000 to purchase a refrigerator. The refrigerator is expected to have a useful life of 5 years and a salvage value of $5000 at the end of 5 years. |
| April-06 | Purchased supplies for $500 for cash. |
| April-09 | Received $700 cash as an advance payment from a client to be served in May. |
| April-10 | Recorded sale to customers. Cash receipts were $700 and invoices for sales on account were $1500. |
| April-15 | Paid $1460 cash for employee semi-monthly salaries. |
| April-16 | Collected $400 from accounts receivable. |
| April-23 | Received monthly utility bills amounting to $340. The bills are to be paid in May. |
| April-25 | Paid advertising expense for advertisements run during April, $260. |
| April-30 | Recorded services to customers . Cash receipts were $1300 and invoices for services on account were $1800. |
| April-30 | Paid $1460 cash for employer salaries |
Required:
1. Record the transaction for April in general journal.
2. Open general ledger accounts, using the T-accounts provided, and post the general journal entries to the ledger.
Month of May
| Date | |
| May-01 | Collected $1900cash from customer accounts receivable |
| May-02 | Purchased supplies on account that cost $360 |
| May-07 | Recorded services of catering to customers and cash receipts were $610 and invoices for services on account were $1800 |
| May-08 | The catering job was completed that was paid for in advance on April 9 |
| May-10 | Paid the utility company for the monthly utility bills that had been received in the previous month, $340 |
| May-15 | Paid $1800 cash for employee salaries |
| May-15 | Purchased a one-year insurance policy for $1200 on the refrigerator |
| May-16 | Paid $220 on the account payable that was established when supplies were purchased on May 2. |
| May-20 | Paid a $400cash dividend to the stockholders |
| May-27 |
Received monthly utility bills amounting to $360. The bills would be paid in the month of June |
| May-31 |
Recorded revenues to customers. Cash receipts were $900, and invoices for sales on account were $1400 |
| May-31 | Paid $1800 cash for employee salaries |
Required:
1. Record the transactions for May in general journal.
2. Post the transactions into T-accounts created for the month of April.
In: Accounting
Logan Township acquired its water system from a private company
on June 1. No receivables were acquired with the purchase.
Therefore, total accounts receivable on June 1 had a zero
balance.
Logan plans to bill customers during the month of sale, and 70% of
the resulting billings will be collected during the same month. 90%
of the remaining balance should be collectable in the next
following month. The remaining uncollectible amounts will relate to
citizens who have moved away. Such amounts are never expected to be
collected and will be written off.
Water sales during June are estimated at $3,000,000 and remain the
same in July and August.
Estimate the monthly cash collections for August. An example for
June and July follows:
| June | July | August |
| $3,000,000 X .7 = $2,100,000 (June receivables collected in June). This leaves $900,000 yet to be collected. | $3,000,000 X .7 = $2,100,000 (July billings collected in July). In addition, 90% of June’s uncollected receivables will be collected: $900,000 X .9 = $810,000. $2,100,000 + $810,000 = $2,910,000 will be collected in July. ($90,000 will never be collected) |
Without performing calculations, how would the answer change if
Logan bills customers in the month following the month of sale?
In: Accounting
Ladora Construction Company began operations on January 1, 2019, when it acquired $30,000 cash from the issuance of common stock. During the year, Ladora purchased $6,000 of direct raw materials and used $5,640 of the direct materials. There were 108 hours of direct labor worked at an average rate of $20 per hour paid in cash. The predetermined overhead rate was $9 per direct labor hour. The company started construction on three prefabricated buildings. The job cost sheets reflected the following allocations of costs to each building:
Direct Materials Direct Labor Hours
Job 1 1440 30
Job 2 2400 50
Job 3 1800 28
The company paid $320 cash for indirect labor costs. Actual overhead cost paid in cash other than indirect labor was $640. Ladora completed Jobs 1 and 2 and sold Job 1 for $5,000 cash. The company incurred $600 of selling and administrative expenses that were paid in cash. Over- or underapplied overhead is closed to Cost of Goods Sold.
Required
A) Record T-accounts.
B) Reconcile all subsidiary accounts with their respective control accounts.
C) Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.
D) Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2019.
In: Accounting
1. Perry Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $825,000. At the time of acquisition Perry paid $30,000 to have the assets appraised. The appraisal disclosed the following values:
|
Land |
$480,000 |
|
Buildings |
348,000 |
|
Equipment |
96,000 |
What cost should be assigned to the land, buildings, and equipment, respectively?
|
$427,500, $342,000, and $85,500. |
|
|
$412,500, $330,000, and $82,500. |
|
$480,000, $384,000, and $96,000. |
|
|
$285,000, $285,000, and $285,000. |
2. Davis Company purchased a new piece of equipment on July 1, 2017 at a cost of $2,400,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $200,000. The current year end is 12/31/18. Davis records depreciation to the nearest month.
A)What is straight-line depreciation for 2018?
|
$220,000. |
|
|
$440,000. |
|
$480,000. |
|
|
$240,000. |
B)What is sum-of-the-years'-digits depreciation for 2018?
|
$660,000. |
|
|
$720,000. |
|
$781,485. |
|
|
$586,667. |
C)What is double-declining-balance depreciation for 2018?
|
$880,000. |
|
|
$960,000. |
|
$768,000. |
|
|
$576,000. |
D)If Davis expensed the total cost of the equipment at 7/1/17, what was the effect on 2017 and 2018 income before taxes, assuming Davis uses straight-line depreciation?
|
$2,400,000 understated and $240,000 overstated. |
|
|
$2,180,000 understated and $440,000 overstated. |
|
$1,960,000 understated and $440,000 overstated. |
|
|
$2,160,000 understated and $240,000 overstated. |
E)If, at the end of 2019, Davis Company decides the equipment still has five more years of life beyond 12/31/19, with a salvage value of $200,000, what is straight-line depreciation for 2019? (Assume straight-line used in all years.)
|
$290,000. |
|
|
$440,000. |
|
$256,667. |
|
|
$240,000. |
3. Sawyer Corporation has a machine (Machine A) that it acquired on 1/1/18 for $900,000. On 12/31/18 such machines have a selling price and fair value of $1,035,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method.
Brown Corporation has a machine (Machine B) that it acquired on 1/1/18 for $1215,000. On 12/31/18 such machines have a selling price and fair value of $900,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method.
On 12/31/18 Brown gave Machine B plus $135,000 cash to Sawyer in
return for
Machine A.
A)Assume that both Sawyer and Brown are new machine dealers and that the machines are still new. Also assume that the exchange lacks commercial substance. At what amount will Machine A be recorded on Brown’s books?
|
$1,215,000. |
|
|
$1,350,000. |
|
$1,035,000. |
|
|
$900,000. |
B)Given the assumptions in 10 above, at what amount will Machine B be recorded on Sawyer's books?
|
$1,052,610. |
|
|
$900,000. |
|
$1,215,000. |
|
|
$782,609. |
C)Assume that instead of dealers, both Sawyer and Brown are machine manufacturers and use the machines in production. Assume the exchange lacks commercial substance. At what amount will Brown record Machine A?
|
$1,215,000. |
|
|
$1,350,000. |
|
$900,000. |
|
|
$1,035,000. |
D)Given the assumption in 12 above, at what amount will Sawyer record Machine B?
|
$704,348. |
|
|
$929,348. |
|
$675,000. |
|
|
$839,340. |
E)Given the assumption in 12 above except that the fair values of Machines A and B are $840,000 and $1,125,000, respectively, at what amount will Brown record Machine A?
|
$1,228,500. |
|
|
$1,260,000. |
|
$1,125,000. |
|
|
$1,093,500. |
F)Return to the original problem. Assume that Sawyer is a dealer selling new machines and that Brown is a manufacturer. Assume that the exchange has commercial substance. For this transaction, at what amount will Sawyer record the truck?
|
$1,035,000. |
|
|
$1,228,500. |
|
$900,000. |
|
|
$1,093,500. |
G)Given the assumptions in 15 above, at what amount will Brown record Machine A?
|
$1,228,500. |
|
|
$1,093,500. |
|
$1,035,000. |
|
|
$900,000. |
H)Given the assumptions in 15 above except that the selling prices and fair market values of A and B are $1,260,000 and $1,125,000, respectively, at what amount will Brown record Machine A?
|
$1,260,000. |
|
|
$1,125,000. |
|
$1,093,500. |
|
|
$1,012,500. |
In: Accounting
In: Accounting
Robertson Real Estate Recapitalization
Founded 25 years ago by CEO Steve Robertson, Robertson Real Estate (RRE) purchases commercial real estate (land and buildings), rents both to tenants. The company has shown consistent annual profits over the past 18 years, and shareholders have been pleased with the company's management. Before he started RRE, Steve was also the founder and CEO of a now bankrupt Ostrich farm. This previous bankruptcy has made him extremely reluctant to undertake any type of debt financing, and he has financed the real estate company 100% with equity. Robertson Real Estate stock currently trades at $37.80 per share and has 8 million shares of common stock outstanding.
The company has been reviewing an opportunity to purchase a large segment of land in the southeastern United States for $85 million and plans to lease this property to one or more farming operations. The land purchase is expected to increase RRE's annual pretax earnings by $14.125 million in perpetuity. Raylynne Givins, the company's new CFO, determined the company's current cost of capital is 10.2%. She feels the company would be more valuable if it added some debt to its capital structure, so she is evaluating whether the company should issue debt to fully finance the project.
Based on conversations with several investment banks, Raylynne believes RRE can issue bonds at par value with a 6% coupon rate. Her analysis suggests a capital structure using 70% equity / 30% debt would be optimal. If the company's debt structure exceeds 30%, RRE's bond rating would be lower and require a significantly higher coupon due to the increased exposure to financial distress and the associated higher financing costs. RRE has a combined state and federal corporate tax rate of 23%.
Questions:
In: Finance
Robertson Real Estate Recapitalization
Founded 25 years ago by CEO Steve Robertson, Robertson Real Estate (RRE) purchases commercial real estate (land and buildings), rents both to tenants. The company has shown consistent annual profits over the past 18 years, and shareholders have been pleased with the company's management. Before he started RRE, Steve was also the founder and CEO of a now bankrupt Ostrich farm. This previous bankruptcy has made him extremely reluctant to undertake any type of debt financing, and he has financed the real estate company 100% with equity. Robertson Real Estate stock currently trades at $37.80 per share and has 8 million shares of common stock outstanding.
The company has been reviewing an opportunity to purchase a large segment of land in the southeastern United States for $85 million and plans to lease this property to one or more farming operations. The land purchase is expected to increase RRE's annual pretax earnings by $14.125 million in perpetuity. Raylynne Givins, the company's new CFO, determined the company's current cost of capital is 10.2%. She feels the company would be more valuable if it added some debt to its capital structure, so she is evaluating whether the company should issue debt to fully finance the project.
Based on conversations with several investment banks, Raylynne believes RRE can issue bonds at par value with a 6% coupon rate. Her analysis suggests a capital structure using 70% equity / 30% debt would be optimal. If the company's debt structure exceeds 30%, RRE's bond rating would be lower and require a significantly higher coupon due to the increased exposure to financial distress and the associated higher financing costs. RRE has a combined state and federal corporate tax rate of 23%.
Questions:
In: Finance