1. The Cinci Company issues $100,000, 10% bonds at 103 on April 1, 2020. The bonds are dated January 1, 2020 and mature six years from that date. Straight-line amortization is used. Interest is paid annually each December 31. Compute the bond carrying value as of December 31, 2023.

Answer

$_______________

P4-20: Integrative: Pro forma statements Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided below to prepare the financial plans.

The following financial data are also available:

1. The firm has estimated that its sales for 2020 will be $900,000.
2. The firm expects to pay $35,000 in cash dividends in 2020.
3. The firm wishes to maintain a minimum cash balance of $30,000.
4. Accounts receivable represent approximately 18% of annual sales.
5. The firm’s ending inventory will change directly with changes in sales in 2020.
6. A new machine costing $42,000 will be purchased in 2020. Total depreciation for 2020 will be $17,000.
7. Accounts payable will change directly in response to changes in sales in 2020.
8. Taxes payable will equal one-fourth of the tax liability on the pro forma income statement.
9. Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged.

1. Prepare a pro forma income statement for the year ended December 31, 2020, using the percent-of-sales method.
2. Prepare a pro forma balance sheet dated December 31, 2020, using the judgmental approach.
3. Analyze these statements, and discuss the resulting external financing required.

Please show your work. It does not help me if you just provide the answers.

The comparative statement of financial position of Blue Spruce Corporation as at December 31, 2020, follows:

Net income of $37,900 was reported and dividends of $12,500 were declared and paid in 2020. New equipment was purchased, and equipment with a carrying value of $4,800 (cost of $11,900 and accumulated depreciation of $7,100) was sold for $8,100.

Other data:

Accrued but unrecorded and uncollected consulting fees earned at December 31 amount to: $27500.

The company determined that $16500 of previously unearned consulting fees had been earned at December 31.

Office supplies on hand at December 31 total $330

The company purchased all of its equipment when it first began business. At that time, the estimated useful life of the equipment was six years.

The company prepaid its nine-month rent agreement on June 1, 2020.

The company prepaid its six-month insurance policy on December 1, 2020

Accrued but unpaid salaries total $13200 at December 31,2020.

On September 1, 2020, the company borrowed $66000 by signing an eight-month, 4 percent note payable. The entire amount, plus interest, is due March 31, 2021.

Account                                                                                 Debit                             Credit

Cash                                                                                       304,150

Accounts Receivable                                                            99,000

Office supplies                                                                            880

Prepaid rent.                                                                           3,960

Unexpired insurance                                                              1,650

Office equipment                                                                  79,200

Accumulated depreciation: office equipment                                                        26,400

Accounts payable                                                                                                           4,400

Notes payable (due 3/1/12)                                                                                       66,000

Interest payable                                                                                                                 660

Income taxes payable                                                                                                    9,900

Dividends payable                                                                                                          3,500

Unearned consulting fees                                                                                           24,200

Capital stock                                                                                                                  220,000

Retained earnings                                                                                                         44,000

Dividends                                                                              3,500

Consulting fees earned                                                                                               550,000

Rent expense                                                                      16,170

Insurance expense                                                               2,420

Office supplies expense                                                      4,950

Depreciation expense: office equipment                      12,100

Salaries expense                                                                363,000

Utilities expense                                                                    5,280

Interest expense                                                                    3,300

Income taxes expense                                                        49,500

Totals                                                                                   949,060                      949,8060

Instructions:

1. Prepare the necessary adjusting journal entries on December 31, 2020. Also prepare an adjusted trial balance dated December 31, 2020 (20 points).
2. From the adjusted trial balance prepared in part a, prepare an income statement and statement of retained earnings for the year ended December 31, 2020. Also prepare the company’s balance sheet dated December 31, 2020 (20 points).
3. Prepare the necessary year-end closing entries (15 points).
4. Prepare an after-closing trial balance (15 points).
5. Compute the company’s average monthly insurance expense for January through November 2020 (5 points).

1. Integrative: Pro forma statements Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided below to prepare the financial plans.

   The following financial data are also available:

   1. The firm has estimated that its sales for 2020 will be $900,000.

   2. The firm expects to pay $35,000 in cash dividends in 2020.

   3. The firm wishes to maintain a minimum cash balance of $30,000.

   4. Accounts receivable represent approximately 18% of annual sales.

   5. The firm’s ending inventory will change directly with changes in sales in 2020.

   6. A new machine costing $42,000 will be purchased in 2020. Total depreciation for 2020 will be $17,000.

   7. Accounts payable will change directly in response to changes in sales in 2020.

   8. Taxes payable will equal one-fourth of the tax liability on the pro forma income statement.

   9. Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged.

   1. Prepare a pro forma income statement for the year ended December 31, 2020, using the percent-of-sales method.

   2. Prepare a pro forma balance sheet dated December 31, 2020, using the judgmental approach.

   3. Analyze these statements, and discuss the resulting external financing required.

      Red Queen Restaurants Income Statement for the Year Ended December 31, 2019

      Sales revenue $800,000 Less: Cost of goods sold    600,000       Gross profits $200,000 Less: Operating expenses    100,000       Net profits before taxes $100,000 Less: Taxes (rate = 21%)    21,000       Net profits after taxes $ 79,000 Less: Cash dividends    20,000       To retained earnings $ 59,000

      Red Queen Restaurants Balance Sheet December 31, 2019

      Assets Liabilities and stockholders’ equity Cash $ 32,000 Accounts payable $100,000 Marketable securities 18,000 Taxes payable 20,000 Accounts receivable 150,000 Other current liabilities   5,000 Inventories    100,000      Total current liabilities $125,000      Total current assets $300,000 Long-term debt    200,000 Net fixed assets    350,000      Total liabilities $325,000      Total assets $650,000 Common stock 150,000 Retained earnings    175,000 Total liabilities and stockholders’ equity $650,000

2. LG 5

Assuming that Mccphae Corporation has done each of the following in preparation for its fiscal year-end December 31, 2020 statements, and no adjustments or corrections were made except as noted, what would be the effect of each on: (a) total assets on December 31, 2020? (b) total liabilities on December 31, 2020? (c) owners’ equity on December 31, 2020? (d) cash on December 31, 2020? Circle U/S for understate, O/S for overstate, or NE for no effect. Treat each item independently and ignore income tax effects. 1. No entry for accrued interest on a note payable was made. The $60,000 note was issued on March 1, 2020 and accrues 8% interest annually. The interest will be paid on March 1, 2021. (a) total assets U/S O/S NE (b) total liabilities U/S O/S NE (c) owners’ equity U/S O/S NE (d) cash U/S O/S NE 2. Insurance of $6,000 was prepaid on November 1, 2020 for the six months beginning November 1 and recorded as “Prepaid Insurance.” On December 31, 2020, the following adjustment was made: Insurance Expense $2,000 Cash $2,000 (a) total assets U/S O/S NE (b) total liabilities U/S O/S NE (c) owners’ equity U/S O/S NE (d) cash U/S O/S NE 3. Employee wages of $100,000 were earned in December, but will be paid in January of 2021. No entry was recorded. (a) total assets U/S O/S NE (b) total liabilities U/S O/S NE (c) owners’ equity U/S O/S NE (d) cash U/S O/S NE 4. Depreciation of factory equipment for $200,000 was not recorded. (a) total assets U/S O/S NE (b) total liabilities U/S O/S NE (c) owners’ equity U/S O/S NE (d) cash U/S O/S NE

O’Brien Company is in the process of closing its books at the end of 2020. The company's preliminary income statement for 2020 and its reported income statement for 2019 are given below.

O’Brien's records reveal the following information:

1. In examining the preliminary financial statements, O’Brien realized that it failed to accrue sales commissions at the end of each of the last two years. O’Brien should have accrued $3,500 at the end of 2019 and $2,500 at the end of 2020.

2. O’Brien purchased equipment on January 2, 2017, that cost $70,000 and had a useful life of 10 years and zero salvage value. The straight-line method of depreciation was originally chosen. However, in reviewing the preliminary financial statements, O’Brien decided to change the depreciation method from straight-line to sum-of-the-years'-digits; the estimates relating to useful life and salvage value remained unchanged.

3. At the end of 2020, O’Brien decided to change its inventory costing method from FIFO cost to the Average method. An analysis of the accounting records provides the following cost of goods sold amounts under average cost and FIFO:

                                    Year                     FIFO             Average

                                    2018                 426,500            428,000

                                    2019                 428,750            430,000

                                    2020                 427,500            432,000

O’Brien purchased equipment on July 2, 2016. The asset's original cost was $30,000, and this amount was entirely expensed in 2016. This particular asset has a 10-year useful life and a $5,000 residual value. The straight-line method was chosen for depreciation purposes.

Required:

1. Prepare the necessary journal entries at December 31, 2020, to record the above information.

2. Prepare new comparative income statements to reflect the adjustments required (1) through (4) above. You may ignore income taxes.

3. Retained earnings reported for the end of 2019 was $696,380 and at the end of 2018 was $625,400. Dividends of $30,000 were declared in each year. Prepare comparative statements of retained earnings for O’Brien Company for 2020 and 2019, reflecting appropriate adjustments from items (1)-(4) above, ignoring income taxes.

John Deere is operated as a C corporation. The company received an order for a $12,000 tractor from a customer on June 30, 2020 and delivered the tractor to the customer on July 31, 2020. The company sent the customer a bill saying they had to pay for the tractor by no later than January 31, 2021. John Deere uses a calendar year tax period. Based on phone calls with the customer in December of 2020, the customer explained that it may have to file bankruptcy proceedings but was trying to work its way out of financial hardship before taking that option. The customer said that at worst it would be able to pay at least $9,000 of the bill. On January 15, 2021, John Deere received a check from the customer for $9,000 and was informed it would receive no additional payment based on the outcome of the bankruptcy case. In addition to the transaction above, the following occurred:

• A different customer paid for the same type of tractor (at $12,000) on November 1, 2020 and scheduled delivery for January 15, 2021. John Deere included the income in its 2020 financial accounting statements.
• The company both incurred and paid expenses for the following in 2020:
  • Wages:                                                                               $3,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $2,000
• The company both incurred and paid expenses for the following in 2021:
  • Wages:                                                                               $4,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $3,000

1. Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
2. Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
3. Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   

d. Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?

The unadjusted trial balance of Vancouver Trucking Inc., at December 31, 2020, is as follows:DebitCreditCash$17,310Accounts Receivable102,500Allowance for Doubtful Accounts$3,390Inventory61,000Prepaid Insurance4,559Bond Investment at Amortized Cost57,120Land31,800Buildings154,000Accumulated Depreciation—Buildings12,560Equipment32,400Accumulated Depreciation—Equipment5,400Goodwill17,000Accounts Payable100,400Bonds Payable (20-year, 7%)162,000Common Shares120,100Retained Earnings61,139Sales Revenue197,000Rent Revenue10,350Advertising Expense23,400Supplies Expense10,300Purchases97,100Purchase Discounts950Salaries and wages expense52,800Interest Expense12,000$673,289$673,289

Preparethe followingadjusting and correcting entries for December 31, 2020, using the information given, for the scenarios below (#1 -#9):

1.Actual advertising costs amounted to $1,580 per month. The company has already paid for advertisements for the first quarter of 2021.

2.The building was purchased and occupied on January 1, 2017, with an estimated useful life of 10 years, and residual value of $38,400. (The company uses straight-line depreciation.)

3.Prepaid insurance contains the premium costs of several policies, including Policy A, cost of $2,807, one-year term, taken out on April 1, 2020; and Policy B, cost of $1,962, three-year term, taken out on September 1, 2020.

4.A portion of Vancouver’s Trucking Inc. building has been converted into a snack bar that has been rented to the Blue Spruce Corp. since July 1, 2018, at a rate of $8,900 per year payable each July 1 in advance.

5.One of the company’s customers declared bankruptcy on December 30, 2020. It is now certain that the $2,680 the customer owes will never be collected. This fact has not been recorded. In addition, the Companyestimates that 3% of the Accounts Receivable balance on December 31, 2020, willbecome uncollectible.

6.An advance of $610 to a salesperson on December 31, 2020, was charged to Salaries and Wages Expense.

7.On November 1, 2015, Vancouver Truckingissued 162 $1,000 bonds at par value. Interest is paid semi-annually on April 30 and October 31.

8.The equipment was purchased on January 1, 2015, with an estimated useful life of 10 years, and no residual value. (The company uses straight-line depreciation.)

9.On August 1, 2020, Vancouver Truckingpurchased at par value 42 $1,860, 8% bonds maturing on July 31, 2019. Interest is paid on July 31 and January