The post-closing trial balance of Carla Vista Corporation at
December 31, 2020, contains the following stockholders’ equity
accounts.
| Preferred Stock (14,300 shares issued) | $715,000 | |
| Common Stock (253,000 shares issued) | 3,795,000 | |
| Paid-in Capital in Excess of Par—Preferred Stock | 253,000 | |
| Paid-in Capital in Excess of Par—Common Stock | 396,000 | |
| Common Stock Dividends Distributable | 379,500 | |
| Retained Earnings | 777,600 |
A review of the accounting records reveals the following.
| 1. | No errors have been made in recording 2020 transactions or in preparing the closing entry for net income. | |
| 2. | Preferred stock is $50 par, 6%, and cumulative; 14,300 shares have been outstanding since January 1, 2019. | |
| 3. | Authorized stock is 19,300 shares of preferred, 506,000 shares of common with a $15 par value. | |
| 4. | The January 1 balance in Retained Earnings was $1,100,000. | |
| 5. | On July 1, 22,000 shares of common stock were issued for cash at $18 per share. | |
| 6. | On September 1, the company discovered an understatement error of $85,000 in computing salaries and wages expense in 2019. The net of tax effect of $59,500 was properly debited directly to Retained Earnings. | |
| 7. | A cash dividend of $379,500 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2019. | |
| 8. | On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18. | |
| 9. | Net income for the year was $572,000. | |
| 10. | On December 31, 2020, the directors authorized disclosure of a $191,000 restriction of retained earnings for plant expansion. (Use Note X.) |
Prepare a stockholders’ equity section at December 31, 2020
In: Accounting
Case Study
Will Saleh and Sons Nursery Company, Al Kharj overcome prevailing business turbulence?
Mr Saleh is the owner and Chief Executive Officer (CEO) of a family owned and operated business established in 1990. His business operated under the name of Saleh and Sons Nursery Company and based in Al Kharj, Kingdom of Saudi Arabia (KSA). The company’s net worth is SAR 5 million. Their nursery is situated 40 Km away from Al Kharj which is managed by two of his sons. The nursery specializes in cultivating a variety of seasonal and perennial plants both indoor and outdoor and engaged in transplanting, budding, and grafting. Elder son Rakan manages outdoor plant business while younger one Salim manages the indoor plant business. In addition to nursery operations, the company also deals in other floriculture commodities related to seeds, soil, fertilizers, gardening tools, garden decorative etc.
The company is renowned and reputed in Al Kharj and adjoining cities since it has been in business for the last 30 years. It has 20% market share in the region. The Fresh Plant Company and Friends plant company are its two main rivals who operate out of Riyadh. Both hold a market share of 30% and 25% respectively. Remaining market is shared between big retail stores and unorganized businesses. However, Saleh has a competitive advantage of being local in Al Kharj region by catering to the needs of his customers by providing bespoke and consultative customer service. In spite of this advantage, their business is witnessing sluggish growth patterns over the past 5 years owing to the presence of new big retail stores who also stock indoor plants. Often these stores sell these plants at heavily discounted prices even below the cost prices that directly impacted Saleh’s business with decreasing sales and depleting profits. Nursery business annually growth rate is 15% due to awareness of the advantage of being green by community at large.
The company opened its first retail store (1990) in the Al Kharj city center near the main vegetable market which is a very popular and strategic located. The second store was opened up a decade ago along Riyadh road, Al Kharj due to recent economic developments in the region. Considering business scalability and expansion, Saleh shown interest in his sons to open up a Flower and Boutique store noticing a shift in consumer buying behavior in gifting from chocolates to flowers. Rakan is computer engineer proposed to open an online store and invest in building an e-commerce platform. On other hand Salim is a business management graduate, he proposed to reposition their products categories and diversify their business into gardening and landscaping since there is no other company offering such types of services in Al Kharj. Whereas Saleh intends to scale up and expand its business operations by opening new retail stores in nearby cities of Dilam, Hota Bin Tamimi ,Riyadh etc.
Saleh stands on a cross road, he wanted to convene a meeting with his sons and the company top management in order to discuss business scalability and expansion strategies from 2020 and beyond especially with Pandemic crisis.
Questions
Q1. Analysis of at least five micro(actors) and five macro(factors) environment factors affecting Saleh and Sons Nursery Company business in current situation. (
Q2. You are the company marketing head, propose viable five new business development plans with strategies to the top management.
Q3. Saleh intends to make policies in Corporate Social Responsibility (CSR) coupled with social marketing. Frame five plans with strategies can be devised to community engagement for this initiative?
In: Operations Management
Q1. The research department of ABC Limited has recently developed a new product which can be
manufactured using either of two methods. The costs involved under each of these methods are:
Method I: Plant with an estimated useful life of five years and a nil scrap value would be acquired for GH¢200,000. Fixed expenses (other than depreciation) would amount to GH¢60,000 per annum and variable costs per unit would be GH¢35.
Method II: Plant with an estimated useful life of five years and a nil scrap value would be acquired for GH¢80,000. Fixed expenses (other than depreciation) would amount to GH¢29,000 per annum and variable costs per unit would be GH¢45.
The product is to be marketed at GH¢60 per unit irrespective of the level of sales achieved. The maximum feasible production capacity under either method is 10,000 units.
Working capital requirements are GH¢40,000 under each method of production and the company depreciate plant on straight line basis.
Required:
a) Determine the number of units which must be produced and sold under either method each year in order to break even. 7 marks
b) Compute the number of units which must be produced and sold under either method each year in order to achieve a target return of 20% on capital invested. (Show workings). 8 marks
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2018. The
company buys debt securities, intending to profit from short-term
differences in price and maintaining them in an active trading
portfolio. Ornamental’s fiscal year ends on December 31. No
investments were held by Ornamental on December 31, 2017.
| Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $400,000 at face value. | ||
| Sep. | 1 | Acquired $900,000 of American Instruments’ 10% bonds at face value. | ||
| Sep. | 30 | Received semiannual interest payment on the Distribution Transformers bonds. | ||
| Oct. | 2 | Sold the Distribution Transformers bonds for $425,000. | ||
| Nov. | 1 | Purchased $1,400,000 of M&D Corporation 6% bonds at face value. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: |
| American Instruments bonds | $ | 850,000 | |
| M&D Corporation bonds | $ | 1,460,000 | |
(Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2018, as well as any adjusting entries
necessary at year end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2018 income statement, 2018 statement of
comprehensive income, and 12/31/2018 balance sheet as a result of
these investments.
In: Accounting
he following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017. Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $530,000 at face value. Sep. 1 Acquired $1,290,000 of American Instruments' 10% bonds at face value. Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. Oct. 2 Sold the Distribution Transformers bonds for $565,000. Nov. 1 Purchased $2,050,000 of M&D Corporation 6% bonds at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bonds $ 1,243,000 M&D Corporation bonds $ 2,123,000 (Hint: Interest must be accrued.) Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2018. The
company buys debt securities, intending to profit from short-term
differences in price and maintaining them in an active trading
portfolio. Ornamental’s fiscal year ends on December 31. No
investments were held by Ornamental on December 31, 2017.
| Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $460,000 at face value. | ||
| Sep. | 1 | Acquired $1,080,000 of American Instruments' 10% bonds at face value. | ||
| Sep. | 30 | Received semiannual interest payment on the Distribution Transformers bonds. | ||
| Oct. | 2 | Sold the Distribution Transformers bonds for $515,000. | ||
| Nov. | 1 | Purchased $1,700,000 of M&D Corporation 6% bonds at face value. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: |
| American Instruments bonds | $ | 1,036,000 | |
| M&D Corporation bonds | $ | 1,766,000 | |
(Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2018, as well as any adjusting entries
necessary at year end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2018 income statement, 2018 statement of
comprehensive income, and 12/31/2018 balance sheet as a result of
these investments.
In: Accounting
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.
Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $570,000 at face value.
Sep. 1 Acquired $1,410,000 of American Instruments' 10% bonds at face value.
Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds.
Oct. 2 Sold the Distribution Transformers bonds for $625,000.
Nov. 1 Purchased $2,250,000 of M&D Corporation 6% bonds at face value.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments.
The market prices of the investments are: American Instruments bonds $ 1,367,000 M&D Corporation bonds $ 2,327,000 (Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.
2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.
In: Accounting
Problem 12-7 Various transactions related to equity investments: fair value through net income [LO12-5]
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys equity securities as investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.
Mar. 31 Acquired Distribution Transformers Corporation common stock for $540,000.
Sep. 1 Acquired $1,110,000 of American Instruments' common stock.
Sep. 30 Received a $16,200 dividend on the Distribution Transformers common stock.
Oct. 2 Sold the Distribution Transformers common stock for $579,000.
Nov. 1 Purchased $1,560,000 of M&D Corporation common stock.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments.
The market prices of the investments are: American Instruments common stock $ 1,046,000
M&D Corporation common stock $ 1,635,000
Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.
In: Accounting
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.
Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $440,000 at face value.
Sep. 1 Acquired $1,020,000 of American Instruments' 10% bonds at face value.
Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds.
Oct. 2 Sold the Distribution Transformers bonds for $485,000.
Nov. 1 Purchased $1,600,000 of M&D Corporation 6% bonds at face value.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments.
The market prices of the investments are: American Instruments bonds $ 974,000
M&D Corporation bonds $ 1,664,000
(Hint: Interest must be accrued.)
Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.
In: Accounting
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017. Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $570,000 at face value. Sep. 1 Acquired $1,410,000 of American Instruments' 10% bonds at face value. Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. Oct. 2 Sold the Distribution Transformers bonds for $625,000. Nov. 1 Purchased $2,250,000 of M&D Corporation 6% bonds at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bonds $ 1,367,000 M&D Corporation bonds $ 2,327,000 (Hint: Interest must be accrued.) Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.
In: Accounting