Alcorn Service Company was formed on January 1, 2018.
Events Affecting the 2018 Accounting Period
Acquired $20,000 cash from the issue of common stock.
Purchased $800 of supplies on account.
Purchased land that cost $14,000 cash.
Paid $800 cash to settle accounts payable created in Event 2.
Recognized revenue on account of $10,500.
Paid $3,800 cash for other operating expenses.
Collected $7,000 cash from accounts receivable.
Information for 2018 Adjusting Entries
Recognized accrued salaries of $3,600 on December 31, 2018.
Had $100 of supplies on hand at the end of the accounting period.
Events Affecting the 2019 Accounting Period
Acquired $15,000 cash from the issue of common stock.
Paid $3,600 cash to settle the salaries payable obligation.
Paid $9,000 cash in advance to lease office space.
Sold the land that cost $14,000 for $14,000 cash.
Received $6,000 cash in advance for services to be performed in the future.
Purchased $2,400 of supplies on account during the year.
Provided services on account of $24,500.
Collected $12,600 cash from accounts receivable.
Paid a cash dividend of $2,000 to the stockholders.
Paid other operating expenses of $2,850.
Information for 2019 Adjusting Entries
The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.
The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.
Had $300 of supplies remaining on hand at the end of the period.
Recognized accrued salaries of $4,800 at the end of the accounting period.
Recognized $500 of accrued interest revenue.
b-1. Prepare an income statement for 2018 and 2019.
b-2. Prepare the statement of changes in stockholders’ equity for 2018 and 2019.
b-3. Prepare the balance sheet for 2018 and 2019.
b-4. Prepare the statement of cash flows for 2018 and 2019, using the vertical statements model
In: Accounting
|
On January 1, 2013, Plano Company acquired 8 percent (25,600 shares) of the outstanding voting shares of the Sumter Company for $460,800, an amount equal to Sumter’s underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $160,000 on September 15. Sumter reported net income of $389,000 in 2013, $461,200 in 2014, $510,000 in 2015, and $485,600 in 2016. Each income figure can be assumed to have been earned evenly throughout its respective year. In addition, the fair value of these 25,600 shares was indeterminate, and therefore the investment account remained at cost. |
|
On January 1, 2015, Plano purchased an additional 32 percent (102,400 shares) of Sumter for $2,156,150 in cash and began to use the equity method. This price represented a $60,750 payment in excess of the book value of Sumter’s underlying net assets. Plano was willing to make this extra payment because of a recently developed patent held by Sumter with a 15-year remaining life. All other assets were considered appropriately valued on Sumter’s books. |
|
On July 1, 2016, Plano sold 10 percent (32,000 shares) of Sumter’s outstanding shares for $992,000 in cash. Although it sold this interest, Plano maintained the ability to significantly influence Sumter’s decision-making process. Assume that Plano uses a weighted average costing system. |
|
Prepare the journal entries for Plano for the years of 2013 through 2016. |
In: Accounting
Sue is a customer account representative for ABC Company. She
recently acquired several new accounts when a previous
representative, Dan, took an early retirement. Sue reviewed each of
Dan’s accounts to help familiarize herself with his clients and
under- stand how she can better serve each one’s individual needs.
As she was reviewing the client list, she found a major customer
she had never heard of before. Surprised that she had not yet done
business with the company, she called it to introduce herself as
the new representative. When Sue placed the call, she found that
the reported number had been disconnected. Thinking that the
customer may have done business with ABC in the past and have moved
on, she reviewed the account transactions and found that the most
recent transaction had taken place the week prior. During her
review, she also noticed the latest transaction was for an
unusually large amount for ABC. As Sue pursued her curiosity, she
went to other employees to find out more about the company. In her
questioning, she found that none of the employees had ever heard of
the customer. Once she had run out of other avenues, Sue decided to
contact the controller to find out if he could provide any
additional information. When Sue opened the company directory, she
was amazed when she recognized his home address: it was
the same address as the mystery customer!
1. What are some of the possible scenarios for why the addresses
match?
2. What other symptoms would be present in each of the scenarios
you identified in part (1)?
3. What are the implications of the address match if the company is
private? If the company was pub- licly traded?
4. Assuming the company was preparing for an IPO, who should Sue
contact, and what should she say? 5. If Sue believes these revenues
are fictitious, what
should her next course of action be?
In: Accounting
Newcomb Manufacturing
Company was started on January 1, Year 1, when it acquired $5,000
cash from the issue of common stock. During the first year of
operation, $1,600 of direct raw materials was purchased with cash,
and $1,200 of the materials was used to make products. Direct labor
costs of $2,000 were paid in cash. Newcomb applied $1,280 of
overhead cost to the Work in Process account. Cash payments of
$1,280 were made for actual overhead costs. The company completed
products that cost $3,200 and sold goods that had cost $2,400 for
$4,000 cash. Selling and administrative expenses of $960 were paid
in cash.
Required
Prepare T-accounts and record the events affecting Newcomb Manufacturing. Include closing entries.
Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet.
In: Accounting
Pizza Corporation acquired 80 percent ownership of Slice
Products Company on January 1, 20X1, for $152,000. On that date,
the fair value of the noncontrolling interest was $38,000, and
Slice reported retained earnings of $43,000 and had $99,000 of
common stock outstanding. Pizza has used the equity method in
accounting for its investment in Slice.
Trial balance data for the two companies on December 31, 20X5, are
as follows:
| Pizza Corporation |
Slice Products Company |
||||||||||||
| Item | Debit | Credit | Debit | Credit | |||||||||
| Cash & Receivables | $ | 84,000 | $ | 84,000 | |||||||||
| Inventory | 274,000 | 92,000 | |||||||||||
| Land | 81,000 | 81,000 | |||||||||||
| Buildings & Equipment | 505,000 | 164,000 | |||||||||||
| Investment in Slice Products Company | 188,320 | ||||||||||||
| Cost of Goods Sold | 116,000 | 43,000 | |||||||||||
| Depreciation Expense | 21,000 | 11,000 | |||||||||||
| Inventory Losses | 11,000 | 6,000 | |||||||||||
| Dividends Declared | 45,000 | 23,600 | |||||||||||
| Accumulated Depreciation | $ | 191,000 | $ | 77,000 | |||||||||
| Accounts Payable | 42,000 | 15,000 | |||||||||||
| Notes Payable | 262,560 | 117,600 | |||||||||||
| Common Stock | 286,000 | 99,000 | |||||||||||
| Retained Earnings | 300,000 | 89,000 | |||||||||||
| Sales | 210,000 | 107,000 | |||||||||||
| Income from Slice Products Company | 33,760 | ||||||||||||
| $ | 1,325,320 | $ | 1,325,320 | $ | 504,600 | $ | 504,600 | ||||||
Additional Information
Required:
a. Prepare all journal entries that Pizza recorded during 20X5
related to its investment in Slice. (If no entry is
required for a transaction/event, select "No journal entry
required" in the first account field.)
b. Prepare all consolidation entries needed to prepare consolidated
statements for 20X5. (If no entry is required for a
transaction/event, select "No journal entry required" in the first
account field.)
c. Prepare a three-part worksheet as of December 31, 20X5. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
In: Accounting
On January 1, 2021, Waddington Company acquired Middleton Co. by issuing 55,000 shares of its common Stock with a market value of $20 per share. A building on sub’s books was undervalued by $100,000, resulting in annual amortization of $10,000. Also, there was an unrecorded customer list valued at $150,000, resulting in annual amortization of $15,000; as well as a 10-year franchise agreement valued at $125,000. The separate 2021 financial statements for Waddington and Middleton follow.
|
Waddington |
Middleton |
|
|
Sales revenue |
$3,600,000 |
$ 975,000 |
|
Cost of goods sold |
(2,520,000) |
(585,000) |
|
Gross profit |
1,080,000 |
390,000 |
|
Operating expenses |
(684,000) |
(253,500) |
|
Equity income |
99,000 |
_ |
|
Net Income |
$ 495,000 |
$ 136,500 |
|
Retained Earnings, 1/1/21 |
$1,830,500 |
$ 503,750 |
|
Net income |
495,000 |
136,500 |
|
Dividends |
(32,040) |
(20,475) |
|
Retained Earnings, 12/31/21 |
$2,293,460 |
$ 619,775 |
|
Cash and receivables |
$ 772,275 |
$ 477,425 |
|
Inventory |
698,400 |
290,550 |
|
Equity investment |
1,178,525 |
|
|
Property, plant & equipment (Net) |
3,719,520 |
537,550 |
|
Total Assets |
$6,368,720 |
$1,305,525 |
|
Accounts payable |
$ 263,520 |
$ 92,950 |
|
Accrued liabilities |
313,200 |
121,550 |
|
Notes payable |
1,250,000 |
325,000 |
|
Common stock |
407,000 |
65,000 |
|
Additional paid-in capital |
1,824,040 |
81,250 |
|
Retained Earnings, 12/31/11 |
2,293,400 |
619,775 |
|
Total Liabilities and Equities |
$6,368,720 |
$1,305,525 |
Prepare FV allocation schedule
b. Prepare all necessary consolidation entries for 2021 consolidated financial statements.
Now assume that at year-end a goodwill impairment test is conducted before the consolidated statements are issued. The estimated fair value of the subsidiary is $1,100,000. The fair value of the identifiable net assets is $1,050,000. Prepare any journal entries resulting from the test.
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. 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
Question 10
Pepper Company acquired 80 percent of Salt Company's stock at
underlying book value on January 1, 2018. At that date, Salt
reported common stock outstanding of $1,050,000 and retained
earnings of $840,000; the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Salt Company. Salt Co.
sold equipment to Pepper Co. for a $720,000 on December 31, 2018.
Salt Co. had originally purchased the equipment for $800,000 on
January 1, 2015, with a useful life of 10 years and no salvage
value. At the time of the purchase, Pepper Co. estimated that the
equipment still had the same remaining useful life. Both companies
use straight-line depreciation.
Pepper sold land costing $132,000 to Salt Company on June 28, 2019,
for $178,000.
a) Prepare Pepper’s journal entries related to intercompany sale of land and equipment for 2019.
b) Prepare the consolidation entries that related to intercompany sale of land for 2019.
c) Prepare the consolidation entries that related to intercompany sale of equipment for 2019.
In: Accounting
Rebecca Company acquired an equipment on a 10-year non‑cancelable lease on January 1, 20X1. There were annual lease payments of $100 at the end of each of the ten years. The market interest rate was 10% compounded annually. Assume that the lease year coincides with the fiscal year. Present value of $1 annuity (n=10, i=10%) = 6.1446. Note that the useful life of the equipment is 12 years.
In: Accounting