Peters Corp.’s capital structure was as follows:
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December 31 |
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Year 7 |
Year 8 |
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Outstanding shares of stock: |
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Common |
100,000 |
100,000 |
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Convertible preferred |
10,000 |
10,000 |
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9% convertible bonds |
$1,000,000 |
$1,000,000 |
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During Year 8, Peters paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible into 20,000 shares of common stock, and the 9% bonds are convertible into 30,000 shares of common stock. Assume that the income tax rate is 30%.
If net income for Year 8 is $170,000, Peters should report DEPS as
A. $1.40
B. $1.56
C. $1.42
D. $1.70
In: Accounting
A rich aunt has promised you $6,000 one year from today. In addition, each year after that, she has promised you a payment (on the anniversary of the last payment) that is 3% larger than the last payment. She will continue to show this generosity for 20years, giving a total of 20 payments. If the interest rate is 9%, what is her promise worth today?
The present value of the aunt's promise is?
In: Finance
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, Year 1, were as follows:
Record on journal page 11:
| Oct. | 1 | Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. The bonds are classified as a held-to-maturity long-term investment. |
| 7 | Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8. | |
| 14 | Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1. | |
| 29 | Sold 1,000 shares of Solstice Corp. at $45, including commission. | |
| 31 | Recorded the payment of semiannual interest on the bonds issued on May 1 and the amortization of the premium for six months. The amortization is determined using the straight-line method. | |
| Dec. | 31 | Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1. |
| 31 | Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. | |
| 31 | The fair value for Solstice Corp. stock was $39.02 per share on December 31, Year 1. The investment is adjusted to fair value, using a valuation allowance account. Assume that Valuation Allowance for Available-for-Sale Investments had a beginning balance of zero. |
| Required: | |
| 1. | Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. |
Chart of Accounts
| CHART OF ACCOUNTS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| General Ledger | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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In: Accounting
Forten Company, a merchandiser, recently completed its
calendar-year 2017 operations. For the year, (1) all sales are
credit sales, (2) all credits to Accounts Receivable reflect cash
receipts from customers, (3) all purchases of inventory are on
credit, (4) all debits to Accounts Payable reflect cash payments
for inventory, and (5) Other Expenses are paid in advance and are
initially debited to Prepaid Expenses. The company’s income
statement and balance sheets follow.
| 2017 | 2016 | ||
|---|---|---|---|
| Assets | |||
| Cash | $69,400 | $86,500 | |
| Accounts receivable | 85,400 | 63,625 | |
| Inventory | 295,156 | 264,800 | |
| Prepaid expenses | 1,340 | 2,155 | |
| Total current assets | 451,296 | 417,080 | |
| Equipment | 144,500 | 121,000 | |
| Accum. depreciation—Equipment | (43,125) | (52,500) | |
| Total assets | $552,671 | $485,580 | |
| Liabilities and Equity | |||
| Accounts payable | $66,141 | $134,175 | |
| Short-term notes payable | 13,900 | 8,600 | |
| Total current liabilities | 80,041 | 142,775 | |
| Long-term notes payable | 58,500 | 61,750 | |
| Total liabilities | 138,541 | 204,525 | |
| Equity | |||
| Common stock, $5 par value | 188,750 | 163,250 | |
| Paid-in capital in excess of par, common stock | 50,500 | 0 | |
| Retained earnings | 174,880 | 117,805 | |
| Total liabilities and equity | $552,671 | $485,580 | |
| Sales | $647,500 | |
|---|---|---|
| Cost of goods sold | 298,000 | |
| Gross profit | 349,500 | |
| Operating expenses | ||
| Depreciation expense | $33,750 | |
| Other expenses | 145,400 | 179,150 |
| Other gains (losses) | ||
| Loss on sale of equipment | (18,125) | |
| Income before taxes | 152,225 | |
| Income taxes expense | 42,450 | |
| Net income | $109,775 | |
Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $18,125 (details in b).
Sold equipment costing $85,875, with accumulated depreciation of $43,125, for $24,625 cash.
Purchased equipment costing $109,375 by paying $56,000 cash and signing a long-term note payable for the balance.
Borrowed $5,300 cash by signing a short-term note payable.
Paid $56,625 cash to reduce the long-term notes payable.
Issued 3,800 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $52,700.
Prepare a complete statement of cash flows; report its operating activities according to the direct method
In: Accounting
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, Year 1, were as follows:
Record on journal page 10:
| Jan. | 3 | Issued 15,000 shares of $20 par common stock at $30, receiving cash. |
| Feb. | 15 | Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash. |
| May | 1 | Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. |
| 16 | Declared a quarterly dividend of $0.50 per share on common stock and $1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock were outstanding, no treasury shares were held and 20,000 shares of preferred stock were outstanding. Journalize this transaction as two separate entries. | |
| 26 | Paid the cash dividends declared on May 16. | |
| Jun. | 1 | Purchased 7,500 shares of Solstice Corp. at $40 per share plus a $150 brokerage commission. The investment is classified as an available-for-sale investment. |
| 8 | Purchased 8,000 shares of treasury common stock at $33 per share. | |
| 22 | Purchased 40,000 shares of Pinkberry Co. stock directly from the founders for $24 per share. Pinkberry has 125,000 shares issued and outstanding. Equinox Products Inc. treated the investment as an equity method investment. | |
| 30 | Declared a $1.00 quarterly cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock had been issued. | |
| Jul. | 11 | Paid the cash dividends declared on Jun. 30 to the preferred stockholders. |
| Aug. | 27 | Received $27,500 dividend from Pinkberry Co. investment of Jun. 22. |
Record on journal page 11:
| Oct. | 1 | Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. The bonds are classified as a held-to-maturity long-term investment. |
| 7 | Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8. | |
| 14 | Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1. | |
| 29 | Sold 1,000 shares of Solstice Corp. at $45, including commission. | |
| 31 | Recorded the payment of semiannual interest on the bonds issued on May 1 and the amortization of the premium for six months. The amortization is determined using the straight-line method. | |
| Dec. | 31 | Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1. |
| 31 | Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. | |
| 31 | The fair value for Solstice Corp. stock was $39.02 per share on December 31, Year 1. The investment is adjusted to fair value, using a valuation allowance account. Assume that Valuation Allowance for Available-for-Sale Investments had a beginning balance of zero. |
| Required: | |
| 1. | Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. |
CHART OF ACCOUNTSEquinox Products Inc.General Ledger
| ASSETS | |
| 110 | Cash |
| 121 | Accounts Receivable |
| 122 | Allowance for Doubtful Accounts |
| 131 | Merchandise Inventory |
| 132 | Interest Receivable |
| 133 | Prepaid Expenses |
| 141 | Investments-Solstice Corp. Stock |
| 142 | Investment in Pinkberry Co. Stock |
| 143 | Investments-Dream Inc. Bonds |
| 144 | Valuation Allowance for Available-for-Sale Investments |
| 181 | Store Buildings and Equipment |
| 182 | Accumulated Depreciation-Store Buildings and Equipment |
| 183 | Office Buildings and Equipment |
| 184 | Accumulated Depreciation-Office Buildings and Equipment |
| 191 | Goodwill |
| LIABILITIES | |
| 211 | Accounts Payable |
| 221 | Income Tax Payable |
| 225 | Cash Dividends Payable |
| 251 | Bonds Payable |
| 252 | Discount on Bonds Payable |
| 253 | Premium on Bonds Payable |
| REVENUE | |
| 410 | Sales |
| 611 | Dividend Revenue |
| 621 | Interest Revenue |
| 631 | Income of Pinkberry Co. investment |
| 641 | Gain on Sale of Investment |
| EXPENSES | |
| 511 | Cost of Merchandise Sold |
| 512 | Bad Debt Expense |
| 520 | Sales Salaries Expense |
| 521 | Sales Commissions |
| 522 | Office Salaries Expense |
| 531 | Advertising Expense |
| 532 | Delivery Expense |
| 537 | Store Supplies Expense |
| 538 | Office Supplies Expense |
| 539 | Office Rent Expense |
| 541 | Income Tax Expense |
| 551 | Depreciation Expense-Store Buildings and Equipment |
| 552 | Depreciation Expense-Office Buildings and Equipment |
| 591 | Miscellaneous Selling Expense |
| 592 | Miscellaneous Administrative Expense |
| 710 | Interest Expense |
| 731 | Loss on Sale of Investment |
Journal
1. Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. Scroll down for journal page 11.
PAGE 10
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In: Accounting
Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow. FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 Assets Cash $ 66,400 $ 84,500 Accounts receivable 82,380 61,625 Inventory 292,156 262,800 Prepaid expenses 1,320 2,115 Total current assets 442,256 411,040 Equipment 146,500 119,000 Accum. depreciation—Equipment (42,125 ) (51,500 ) Total assets $ 546,631 $ 478,540 Liabilities and Equity Accounts payable $ 64,141 $ 131,175 Short-term notes payable 13,300 8,200 Total current liabilities 77,441 139,375 Long-term notes payable 59,500 59,750 Total liabilities 136,941 199,125 Equity Common stock, $5 par value 184,750 161,250 Paid-in capital in excess of par, common stock 48,500 0 Retained earnings 176,440 118,165 Total liabilities and equity $ 546,631 $ 478,540 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales $ 637,500 Cost of goods sold 296,000 Gross profit 341,500 Operating expenses Depreciation expense $ 31,750 Other expenses 143,400 175,150 Other gains (losses) Loss on sale of equipment (16,125 ) Income before taxes 150,225 Income taxes expense 39,650 Net income $ 110,575 Additional Information on Year 2017 Transactions The loss on the cash sale of equipment was $16,125 (details in b). Sold equipment costing $79,875, with accumulated depreciation of $41,125, for $22,625 cash. Purchased equipment costing $107,375 by paying $52,000 cash and signing a long-term note payable for the balance. Borrowed $5,100 cash by signing a short-term note payable. Paid $55,625 cash to reduce the long-term notes payable. Issued 3,600 shares of common stock for $20 cash per share. Declared and paid cash dividends of $52,300.
Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
In: Accounting
Vagabond Company had net sales of 8,000,000 during the
current year. At year-end, before adjusting entries, the balances
in selected accounts were accounts receivable 2,000,000 debit and
allowance for doubtful accounts 20,000 debit. The entity estimated
and 5% of accounts receivable will prove to be uncollectible, what
is the net realized value of the accounts receivable at
year-end?
a 2,000,000
b.1,900,000
c.1,889.000
d.1,290.000
typo its mean net realizable value
In: Accounting
A rich aunt has promised you $3,000 one year from today. In addition, each year after that, she has promised you a payment (on the anniversary of the last payment) that is 3% larger than the last payment. She will continue to show this generosity for 20 years, giving a total of 20 payments. If the interest rate is 9%, what is her promise worth today?
In: Finance
A rich aunt has promised you $3,000 one year from today. Inaddition, each year after that, she has promised you a payment(on the anniversary of the last payment) that is 3% larger than the last payment. She will continue to show this generosity for 20 years, giving a total of 20 payments. If the interest rate is 8%, what is her promise worth today?
In: Finance
A rich aunt has promised you $3,000 one year from today. In addition, each year after that, she has promised you a payment (on the anniversary of the last payment) that is 2% larger than the last payment. She will continue to show this generosity for 2020 years, giving a total of 2020 payments. If the interest rate is 4%, what is her promise worth today?
In: Finance