Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,350. During May, the total cash deposited was $73,130 and checks written totaled $67,900. The bank statement indicated a balance of $24,790 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $11,040.
2. A deposit of $8,990, representing receipts of May 31, had been made too late to appear on the bank statement.
3. The bank had collected for Brentwood Bike Co. $4,750 on a note left for collection. The face of the note was $4,390.
4. A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
5. A check for $970 returned with the statement had been recorded by Brentwood Bike Co. as $790. The check was for the payment of an obligation to Adkins Co. on account.
6. Bank service charges for May amounted to $40.
7. A check for $1,100 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

You have the following initial information on CMR Co. on which to base your calculations and discussion for Two parts A) and B):

• Current long-term and target debt-equity ratio (D:E) = 1:4

• Corporate tax rate (TC) = 30%

• Expected Inflation = 1.75%

• Equity beta = 1.6385

• Debt beta = 0.2055

• Expected market premium (r_M – r_F) = 6.00%

• Risk-free rate (r_F) = 2.15%

A) The CEO of CMR Co., for which you are CFO, has requested that you evaluate a potential investment in a new project. The proposed project requires an initial outlay of $7.15 billion. Once completed (1 year from initial outlay) it will provide a real net cash flow of $575 million in perpetuity following its completion. It has the same business risk as CMR Co.’s existing activities and will be funded using the firm’s current target D:E ratio.

i) What is the nominal weighted-average cost of capital (WACC) for this project?

ii) As CFO, do you recommend investment in this project? Justify your answer (numerically).

B) Assume now a firm that is an existing customer of CMR Co. is considering a buyout of CMR Co. to allow them to integrate production activities. The potential acquiring firm’s management has approached an investment bank for advice. The bank believes that the firm can gear CMR Co. to a higher level, given that its existing management has been highly conservative in its use of debt. It also notes that the customer’s firm has the same cost of debt as that of CMR Co. Thus, it has suggested use of a target debt-equity ratio of 2:6 when undertaking valuation calculations.

i) What would the required rate of return for BFS Co.’s equity become if the proposed gearing structure were adopted following acquisition by the customer?

ii) Would the above project described in 1) be viable for the new owner of BFS Co.? Justify your answer (numerically).

Please submit Part A and B answers to the following questions in Excel file format (i.e., as an Excel file), and in clear way

Use the modified abstract below to answer the following question: OBJECTIVES: The human immunodeficiency virus (HIV) and M. tuberculosis co-infection is a major global challenge. It is not properly clear why some HIV-positive people are co-infected with tuberculosis (TB) while others are not. This study answered this question. METHODS: This case-control study was conducted in Tehran, Iran, in June 2004, enrolling 2388 HIV-positive people. Cases were selected from those who were co-infected with TB and controls from those without TB. Multiple logistic regression analysis was performed to assess the association between M. tuberculosis/HIV co-infection and several predictors. RESULTS: In this study, 241 cases were compared with 2147 controls. Sex, age, marital status, educational level, imprisonment, smoking, narcotic addiction, route of HIV transmission, previous TB infection, isoniazid preventive therapy (IPT), antiretroviral therapy (ART), and CD4 count were independently associated with M. tuberculosis/HIV co-infection. However, after adjusting for all other variables in the model, only the association between M. tuberculosis/HIV co-infection and the following predictors were of importance: imprisoned (OR=3.82), previous TB infection (OR=5.54). CONCLUSIONS: Conclusions: Several predictors are associated with M. tuberculosis/HIV co-infection, but, there are only a few indicators that significantly affect the risk of M. tuberculosis/HIV co-infection. It is estimated that a number of predictors of M. tuberculosis/HIV co-infection still remain unknown and require further investigations.

Which of the following measures of effect are statistically significant? Select all that apply.

Prepare journal entries to record the following merchandising transactions of Gonzalez's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—King.) Jul. 1 Purchased merchandise from King Company for $6,800 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1. Jul. 2 Sold merchandise to Wright Co. for $1,300 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $780. Jul. 3 Paid $285 cash for freight charges on the purchase of July 1. Jul. 8 Sold merchandise that had cost $1,500 for $2,500 cash. Jul. 9 Purchased merchandise from Lee Co. for $2,600 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. Jul. 11 Returned $500 of merchandise purchased on July 9 from Lee Co. and debited its account payable for that amount. Jul. 12 Received the balance due from Wright Co. for the invoice dated July 2, net of the discount. Jul. 16 Paid the balance due to King Company within the discount period. Jul. 19 Sold merchandise that cost $1,400 to Griffin Co. for $2,000 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19. Jul. 21 Gave a price reduction (allowance) of $400 to Griffin Co. for merchandise sold on July 19 and credited Griffin’s accounts receivable for that amount. Jul. 24 Paid Lee Co. the balance due, net of discount. Jul. 30 Received the balance due from Griffin Co. for the invoice dated July 19, net of discount. Jul. 31 Sold merchandise that cost $4,700 to Wright Co. for $7,800 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Problem 5-1A Preparing journal entries for merchandising activities-perpetual system LO P1, P2

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for $504,000. Birch reported a $510,000 book value and the fair value of the noncontrolling interest was $126,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $160,000 when Cedar had a $164,000 book value and the 20 percent noncontrolling interest was valued at $40,000. In each acquisition, the subsidiary’s excess acquisition-date fair over book value was assigned to a trade name with a 30-year life. These companies report the following financial information. Investment income figures are not included.

Prepare journal entries to record the following merchandising transactions of Clark's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Ryan.)

Jul. 1 Purchased merchandise from Ryan Company for $6,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.

Jul. 2 Sold merchandise to Sanchez Co. for $1,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $720.

Jul. 3 Paid $245 cash for freight charges on the purchase of July 1.

Jul. 8 Sold merchandise that had cost $1,400 for $2,300 cash.

Jul. 9 Purchased merchandise from Perez Co. for $2,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.

Jul. 11 Returned $500 of merchandise purchased on July 9 from Perez Co. and debited its account payable for that amount.

Jul. 12 Received the balance due from Sanchez Co. for the invoice dated July 2, net of the discount.

Jul. 16 Paid the balance due to Ryan Company within the discount period.

Jul. 19 Sold merchandise that cost $1,300 to Hall Co. for $1,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.

Jul. 21 Gave a price reduction (allowance) of $400 to Hall Co. for merchandise sold on July 19 and credited Hall’s accounts receivable for that amount.

Jul. 24 Paid Perez Co. the balance due, net of discount. Jul. 30 Received the balance due from Hall Co. for the invoice dated July 19, net of discount.

Jul. 31 Sold merchandise that cost $4,600 to Sanchez Co. for $7,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,780. During May, the total cash deposited was $74,910 and checks written totaled $69,550. The bank statement indicated a balance of $25,390 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $11,310.

A deposit of $9,210, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,870 on a note left for collection. The face of the note was $4,490.

A check for $360 returned with the statement had been incorrectly charged by the bank as $630.

A check for $850 returned with the statement had been recorded by Brentwood Bike Co. as $580. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $60.

A check for $1,120 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Prepare journal entries to record the following merchandising transactions of Walker's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Thompson.) Jul. 1 Purchased merchandise from Thompson Company for $7,200 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1. Jul. 2 Sold merchandise to Mitchell Co. for $1,500 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $900. Jul. 3 Paid $365 cash for freight charges on the purchase of July 1. Jul. 8 Sold merchandise that had cost $1,700 for $2,900 cash. Jul. 9 Purchased merchandise from Mannion Co. for $2,800 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. Jul. 11 Returned $600 of merchandise purchased on July 9 from Mannion Co. and debited its account payable for that amount. Jul. 12 Received the balance due from Mitchell Co. for the invoice dated July 2, net of the discount. Jul. 16 Paid the balance due to Thompson Company within the discount period. Jul. 19 Sold merchandise that cost $1,700 to Sanchez Co. for $2,400 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19. Jul. 21 Gave a price reduction (allowance) of $500 to Sanchez Co. for merchandise sold on July 19 and credited Sanchez’s accounts receivable for that amount. Jul. 24 Paid Mannion Co. the balance due, net of discount. Jul. 30 Received the balance due from Sanchez Co. for the invoice dated July 19, net of discount. Jul. 31 Sold merchandise that cost $4,900 to Mitchell Co. for $8,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Prepare journal entries to record the following merchandising transactions of Mitchell's, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Taylor.)

prepare the general journal