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The board of directors of Arizona Motor Shops, Inc., authorized the issuance of $1,000,000 face value, 10-year, 6 percent bonds dated April 1, 2016, and maturing on April 1, 2026. Interest is payable semiannually on April 1 and October 1. |
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DATE |
TRANSACTIONS FOR 2016 |
|
Apr. 1 |
Issued $300,000 face value bonds at 102.2. |
|
Oct. 1 |
Paid the semiannual interest on the outstanding bonds and amortized the bond premium. (Make two entries. Use the straight-line method to compute the amortization.) |
|
Dec. 31 |
Recorded the adjusting entry for accrued interest and amortization of the bond premium for three months. (Make one entry.) |
|
31 |
Closed the Bond Interest Expense account to the Income Summary account. |
|
DATE |
TRANSACTIONS FOR 2017 |
|
Jan. 1 |
Reversed the adjusting entry made on December 31, 2016. |
|
1. |
Record the transactions below in general journal form. |
Issued $300,000 face value bonds at 102.2.
Record the payment of semiannual bond interest for the bond issued on April 1
Record the amortization of the premium for the bond issued on April 1.
Recorded the adjusting entry for accrued interest and amortization of the bond premium for three months.
Closed the Bond Interest Expense account to the Income Summary account.
Reversed the adjusting entry made on December 31, 2016.
|
Analyze: |
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If the reversing entry was not recorded, what entry would be required when the interest expense is paid in April 2017? |
Record the entry for interest expenses paid on bonds, if the reversing entry was not recorded.
In: Accounting
Coyote Ltd, a private company reporting under ASPE, reported the following for the years ended May 31, 2017, and 2016
Coyote Ltd.
Balance sheet May 31
| Assets | 2017 | 2016 |
| Cash | $12,600 | $43,000 |
| Accounts recievable | $85,000 | $76,000 |
| Inventory | $172,000 | $160,000 |
| Prepaid expenses | $5,000 | $7,500 |
| Land | $125,000 | $75,000 |
| Equipment | $325,000 | $190,000 |
| Accumulated depreciation | ($68250) | ($40,000 |
| Total assets | $656,350 | $511,500 |
| Liability and Shareholder's equity | ||
| Accounts payable | $43,000 | $38,000 |
| Dividends payable | $7,500 | $5,000 |
| Income taxes payable | $2,500 | $6,000 |
| Mortgage payable | $125,000 | $80,000 |
| Common shares | $217,000 | $167,000 |
| Retained earnings | $261,350 | $215,500 |
| Total liability and shareholder's equity. | $656,350 | $511,500 |
Additional information
1. Profit for 2017 was $108,000
2. common shares were issued for $50,000
3. Land with a cost of $50,000 was sold at a loss of $20,000
4. Purchased land with a cost of $100,000 with a $55,000 down payment and financed the remainder with a mortgage note payable.
5. No equipment was sold during 2017
Instruction:
1. Prepare a cash flow statement for the year using the indirect method.
2. Is it unfavorable for a company to have a net cash outflow from financing activities?
3. Using horizontal analysis, calculate the percentage change between 2016 and 2017.
4. Using vertical analysis, calculate the percentage of the base amount for each year.
5. Based on your calculation in part (3) and (4), identify any significant changes from 2016 to 2017.
In: Accounting
Question 2
Outline the situations where incomplete record techniques will be required to produce a set of financial statements.
3 Marks
On 1 January 2016, P. Jones a sole trader owned a business, that had the following assets and liabilities:
K
Motor vehicles 124,125
Accumulated depreciation on motor vehicles 21,030
Premises 450,000
Receivables 119,250
Allowances for receivables 2,100
Payables 96,000
Accruals 9,750 Inventory 33,400 Prepayments 780
Bank overdraft 11,415 Cash on hand 110
Term loan 210,000
You are required to:
Calculate the proprietor’s capital as at 1 January 2016.
7 Marks
In brief, outline your understanding of why the incomplete record technique used in part
(i) will give the proprietors opening capital.
2 Marks
c) Despite being advised on the importance of maintaining proper books and records P. Jones failed to do so in the year to 31 December 2016. He is able to provide you with the following information:
K
Opening receivables debit balance 119,250
Closing receivables debit balance 224,320
Closing receivables credit balance 1,560
Amounts received from customers 754,100
Discounts allowed to customers 12,450
Irrecoverable debts written off 2,970
Interest charged to receivables for slow payment 4,110
Based upon the information provided, you are required to calculate P. Jones’s credit sales for the year to 31 December 2016. P. Jones is able to tell you that all goods are sold on credit.
8 Marks Total 20 Marks
In: Accounting
Question 1
Describe what it means to capitalise an expenditure. What is the general rule for determining which costs are capitalized when property, plant and equipment is acquired?
Question 2
Mangkuk Tingkat Inc. adopts a revaluation model for their property, plant and equipment measurement. They have two properties in Kuala Lumpur as shown below with their costs and fair value for the year ended.
|
Freehold Land in Bangsar RM ‘000 |
Leasehold Building Land in Cheras RM ‘000 |
|
|
Cost as at 31 December 2016 |
11,000 |
13,100 |
|
Fair value as at 31 December 2016 |
11,200 |
11,800 |
|
Fair value as at 31 December 2017 |
10,000 |
12,200 |
The leasehold building was acquired in 2010 and has a 2 percent depreciation rate per annum.
On September 2017, Mangkuk Tingkat Inc. exchanged equipment with Paku Besi Co. Paku Besi paid Mangkuk Tingkat RM5,000 in cash for the exchange. The information on the exchange are as follows:
|
Mangkuk Tingkat Inc. |
Paku Besi Co. |
|
|
Original cost |
RM 120,000 |
RM 140,000 |
|
Accumulated depreciation |
55,000 |
63,000 |
|
Fair value |
75,000 |
70,000 |
The exchange has commercial substance for both companies.
Required:
a) Show the relevant journal entries to record the adjustments required on the revaluation for the year ended 31 December 2016 and 2017.
b) Show the extract of Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2016 and 2017.
c) Record the exchange for Mangkuk Tingkat Inc. and Paku Besi Co.
In: Accounting
Ayayai Company prepares monthly cash budgets. Relevant data from
operating budgets for 2017 are as follows:
|
January |
February |
|||
| Sales | $363,600 | $404,000 | ||
| Direct materials purchases | 121,200 | 126,250 | ||
| Direct labor | 90,900 | 101,000 | ||
| Manufacturing overhead | 70,700 | 75,750 | ||
| Selling and administrative expenses | 79,790 | 85,850 |
All sales are on account. Collections are expected to be 50% in the
month of sale, 30% in the first month following the sale, and 20%
in the second month following the sale. Sixty percent (60%) of
direct materials purchases are paid in cash in the month of
purchase, and the balance due is paid in the month following the
purchase. All other items above are paid in the month incurred
except for selling and administrative expenses that include $1,010
of depreciation per month.
Other data:
| 1. | Credit sales: November 2016, $252,500; December 2016, $323,200. | |
| 2. | Purchases of direct materials: December 2016, $101,000. | |
| 3. | Other receipts: January—Collection of December 31, 2016, notes receivable $15,150; | |
| February—Proceeds from sale of securities $6,060. | ||
| 4. | Other disbursements: February—Payment of $6,060 cash dividend. |
The company’s cash balance on January 1, 2017, is expected to be
$60,600. The company wants to maintain a minimum cash balance of
$50,500.
Prepare schedules for (1) expected collections from customers and
(2) expected payments for direct materials purchases for January
and February.
|
Expected Collections from Customers |
||||
|
January |
February |
|||
| November |
$ |
$ |
||
| December | ||||
| January | ||||
| February | ||||
| Total collections | $ | $ | ||
|
Expected Payments for Direct Materials |
||||
|
January |
February |
|||
| December |
$ |
$ |
||
| January | ||||
| February | ||||
| Total payments | $ | $ | ||
In: Accounting
Sosa Company has provided the following budget information for the first quarter of 2016 Total sales $297,500 Budgeted purchases of direct materials 39,450 Budgeted direct labor cost 38,880 Budgeted manufacturing overhead costs: Variable manufacturing overhead 3,645 Depreciation 600 Insurance and property taxes 9,120 Budgeted selling and administrative expenses: Salaries expense 5,000 Rent expense 3,000 Insurance expense 1,200 Depreciation expense 100 Supplies expense 2,975 Additional data related to the first quarter of 2016 for Sosa Company: a. Capital expenditures include $36,000 for new manufacturing equipment to be purchased and paid in the first quarter. b. Cash receipts are 60% of sales in the quarter of the sale and 40% in the quarter following the sale. c. Direct materials purchases are paid 70% in the quarter purchased and 30% in the next quarter. d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. e. Income tax expense for the first quarter is projected at $42,000 and is paid in the quarter incurred. f. Sosa Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter. g.The December 31,2015,balance in Cash is $14,000, in Accounts Receivable is $23,200, and in Accounts Payable is $10,500. 1.Prepare Sosa Company's schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2016. 2.Prepare Sosa Company's cash budget for the first quarter of 2016.
In: Accounting
Wildhorse Ltd. purchased a new machine on April 4, 2014, at a cost of $152,000. The company estimated that the machine would have a residual value of $14,000. The machine is expected to be used for 9,200working hours during its four-year life. Actual machine usage was 1,300 hours in 2014; 2,000 hours in 2015; 2,500 hours in 2016; 1,800 hours in 2017; and 1,600hours in 2018. Wildhorse has a December 31 year end.
(a)
Calculate depreciation for the machine under each of the
following methods: (Round expense per unit to 2 decimal
places, e.g. 2.75 and final answers to 0 decimal places, e.g.
5,275.)
(1) Straight-line for 2014 through to 2018.
| 2014 expense | $enter a dollar amount | ||
|---|---|---|---|
| 2015 expense | $enter a dollar amount | ||
| 2016 expense | $enter a dollar amount | ||
| 2017 expense | $enter a dollar amount | ||
| 2018 expense | $enter a dollar amount |
(2) Diminishing-balance using double the
straight-line rate for 2014 through to 2018.
| 2014 expense | $enter a dollar amount | ||
|---|---|---|---|
| 2015 expense | $enter a dollar amount | ||
| 2016 expense | $enter a dollar amount | ||
| 2017 expense | $enter a dollar amount | ||
| 2018 expense | $enter a dollar amount |
(3) Units-of-production for 2014 through to
2018.
| 2014 expense | $enter a dollar amount | ||
|---|---|---|---|
| 2015 expense | $enter a dollar amount | ||
| 2016 expense | $enter a dollar amount | ||
| 2017 expense | $enter a dollar amount | ||
| 2018 expense | $enter a dollar amount |
In: Accounting
The events listed below all took place on 15 june 2016. Provide the journal entry necessary to record each event in the accounts of company X for the year ended 30 June 2016. If no entry is required , indicate this and give reasons. In most cases, an assumption is not necessary. If you feel an assumption is necessary, however, state it.
1) A new general manager is hired at an annual salary of $160000.
2) Company X receives a bill for $200 from a newspaper for an advertisement to be run on 30 June 2016. Payment is not due for 60 days.
3) A loan is obtained from the bank for $20000, repayable in two years time.
4) A landscaper agrees to improve land owned by company X. The agreed price for the work is $700.
5) An order for $900 of merchandise is received from a customer along with a cash deposit of $300.
6) A $600 insurance premium for coverage over the period from 1 July 2016 to 30 June 2017 is paid in cash.
7) Company X places an order for the purchase of supplies with a cost price of $2000.
8) Borrowed $300000 from bank by giving the bank a 9-month, 10 percent interest-bearing note payable.
9) Performed $3000 of the services, the rest will be provided next month.
10) Received the telecommunication bill for $2000 and will be paid in early next month.
11) 1 June received rent in advance of $15000 for the period from 1 June to 1 November.
In: Accounting
2. Complete the below table to calculate income statement data in common-size percents. (Round your percentage answers to 2 decimal places.)
3. Complete the below table to calculate the balance sheet data in trend percents with 2015 as the base year. (Round your percentage answers to 2 decimal places.)
Required information
[The following information applies to the questions
displayed below.]
Selected comparative financial statements of Korbin Company
follow:
| KORBIN COMPANY | |||||||||
| Comparative Income Statements | |||||||||
| For Years Ended December 31, 2017, 2016, and 2015 | |||||||||
| 2017 | 2016 | 2015 | |||||||
| Sales | $ | 440,342 | $ | 337,338 | $ | 234,100 | |||
| Cost of goods sold | 265,086 | 211,511 | 149,824 | ||||||
| Gross profit | 175,256 | 125,827 | 84,276 | ||||||
| Selling expenses | 62,529 | 46,553 | 30,901 | ||||||
| Administrative expenses | 39,631 | 29,686 | 19,430 | ||||||
| Total expenses | 102,160 | 76,239 | 50,331 | ||||||
| Income before taxes | 73,096 | 49,588 | 33,945 | ||||||
| Income taxes | 13,596 | 10,166 | 6,891 | ||||||
| Net income | $ | 59,500 | $ | 39,422 | $ | 27,054 | |||
| KORBIN COMPANY | |||||||||
| Comparative Balance Sheets | |||||||||
| December 31, 2017, 2016, and 2015 | |||||||||
| 2017 | 2016 | 2015 | |||||||
| Assets | |||||||||
| Current assets | $ | 53,155 | $ | 41,588 | $ | 55,593 | |||
| Long-term investments | 0 | 1,100 | 3,100 | ||||||
| Plant assets, net | 97,214 | 103,326 | 62,280 | ||||||
| Total assets | $ | 150,369 | $ | 146,014 | $ | 120,973 | |||
| Liabilities and Equity | |||||||||
| Current liabilities | $ | 21,954 | $ | 21,756 | $ | 21,170 | |||
| Common stock | 68,000 | 68,000 | 50,000 | ||||||
| Other paid-in capital | 8,500 | 8,500 | 5,556 | ||||||
| Retained earnings | 51,915 | 47,758 | 44,247 | ||||||
| Total liabilities and equity | $ | 150,369 | $ | 146,014 | $ | 120,973 | |||
In: Accounting
Q2. In your audit of Aviary Corporation for calendar year 2016, you found a number of matters that you believe represent possible adjustments to the company’s books. These matters are describe below.
1. Inventory cutoff tests indicate that several sales transactions for goods shipped in 2016 were not recorded. Aviary Corporation uses a perpetual inventory system. The sales were on account, for a total amount of $30,000. The associated inventory cost was $10,000.
2. The company currently has set the allowance for bad debts account at $55,000. Your tests indicate that $85,000 is an appropriate amount for the allowance.
3. Equipment originally costing $800,000 that was fully depreciated with a residual value of $100,000 was sold for $140,000 in December 2016. The purchaser agreed to pay for the equipment by January 2017. No entry has been recorded for this transaction.
4. Miscellaneous expenses of $5,000 was incorrectly classified as accounts payable.
5. The company received new computer equipment valued at $50,000 on January 3, 2017, that had been ordered and shipped F.O.B. shipping point to Westmoreland on December 27, 2016. No entry has been recorded for this purchase, which was financed by a long-term note payable due in full June 30, 2018.
Requirements: 1 of 2: Propose auditor’s adjusting entries for the matters above.
2 of 2: Complete the Unadjusted Misstatement Audit Schedule below. Use positive numbers to indicate overstatements, and negative numbers to indicate understatements. Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities Income Before Tax 1. 2. 3. 4. 5. Totals
In: Accounting