15) Redbird Company uses the indirect method to prepare its statement of cash flows. Using the following information, complete the worksheet for the year ended December 31, 2018.
- Net Income for the year ended December 31, 2018 was $49,000
- Depreciation expense for 2018 was $12,000
- During 2018, plant assets with a book value of $10,000 (cost $10,000 and accumulated depreciation $0) were sold for $14,000
- Plant assets were acquired for $52,000 cash
- Issued common stock for $28,000
- Issued long-term notes payable for $34,000
- Repaid long-term notes payable for $40,000
- Purchased treasury stock for 3,000
- Paid dividends of $10,000
Redbird Company
Spreadsheet for Statement of Cash Flows
Year Ended December 31, 2018
|
Balance 12/31/17 |
Transaction Analysis Debit |
Transaction Analysis Credit |
Balance 12/31/18 |
|
|
Panel A—Balance Sheet: |
||||
|
Cash |
$18,000 |
$21,000 |
||
|
Accounts Receivable |
35,000 |
31,000 |
||
|
Merchandise Inventory |
25,000 |
53,000 |
||
|
Plant Assets |
70,000 |
112,000 |
||
|
Accumulated Depreciation—Plant Assets |
(20,000) |
(32,000) |
||
|
Total Assets |
$128,000 |
$185,000 |
||
|
Accounts Payable |
6,000 |
4,000 |
||
|
Accrued Liabilities |
1,000 |
2,000 |
||
|
Long-term Notes Payable |
50,000 |
44,000 |
||
|
Common Stock |
2,000 |
30,000 |
||
|
Retained Earnings |
74,000 |
113,000 |
||
|
Treasury Stock |
(5,000) |
(8,000) |
||
|
Total Liabilities and Stockholders' Equity |
$128,000 |
$185,000 |
In: Accounting
Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. On June 30, 2018, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $27,000 on the purchase date and the balance in eight annual installments of $4,000 on each June 30 beginning June 30, 2019. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? 2. Johnstone needs to accumulate sufficient funds to pay a $570,000 debt that comes due on December 31, 2023. The company will accumulate the funds by making five equal annual deposits to an account paying 7% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2018. 3. On January 1, 2018, Johnstone leased an office building. Terms of the lease require Johnstone to make 20 annual lease payments of $137,000 beginning on January 1, 2018. A 10% interest rate is implicit in the lease agreement. At what amount should Johnstone record the lease liability on January 1, 2018, before any lease payments are made?
In: Accounting
Johnstone Company is facing several decisions regarding
investing and financing activities. Address each decision
independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the
tables provided.)
1. On June 30, 2018, the Johnstone Company
purchased equipment from Genovese Corp. Johnstone agreed to pay
Genovese $27,000 on the purchase date and the balance in eight
annual installments of $4,000 on each June 30 beginning June 30,
2019. Assuming that an interest rate of 10% properly reflects the
time value of money in this situation, at what amount should
Johnstone value the equipment?
2. Johnstone needs to accumulate sufficient funds
to pay a $570,000 debt that comes due on December 31, 2023. The
company will accumulate the funds by making five equal annual
deposits to an account paying 7% interest compounded annually.
Determine the required annual deposit if the first deposit is made
on December 31, 2018.
3. On January 1, 2018, Johnstone leased an office
building. Terms of the lease require Johnstone to make 20 annual
lease payments of $137,000 beginning on January 1, 2018. A 10%
interest rate is implicit in the lease agreement. At what amount
should Johnstone record the lease liability on January 1, 2018,
before any lease payments are made?
In: Accounting
Cornerstone Exercise 7-18 (Algorithmic)
Acquisition Cost
Cox Company recently purchased a machine by paying $13,600 cash and signing a 6-month, 10% note for $10,000. In addition to the purchase price, Cox incurred the following costs related to the machine: freight charges, $720; interest charges, $500; special foundation for machine, $400; installation costs, $1,100.
Required: Determine the cost of the machine. ($25820 was wrong.)
Exercise 7-59 (Algorithmic)
Disposal of Tangible Capital Asset
Pacifica Manufacturing retired a computerized metal stamping machine on December 31, 2018. Pacifica sold the machine to another company and did not replace it. The following data are available for the machine:
| Cost (installed), 1/1/2013 | $920,000 |
| Residual value estimated on 1/1/2013 | 160,000 |
| Estimated life as of 1/1/2013 | 8 years |
The machine was sold for $182,000 cash. Pacifica uses the straight-line method of depreciation.
Required:
1. Prepare the journal entry to record depreciation expense for 2018.
| 2018 Dec. 31 | Depreciation Expense | ||
| Accumulated Depreciation | |||
| Record depreciation expense |
2. Compute accumulated depreciation at December 31, 2018. $
3. Prepare the journal entry to record the sale of the machine. For those boxes in which no entry is required, leave the box blank.
| 2018 Dec. 31 | Cash | ||
| Accumulated Depreciation | |||
| Loss on Disposal of Property, Plant, and Equipment | |||
| Machine | |||
| Record sale of machine |
In: Accounting
|
Ernest Real Estate Appraisal |
|||
|
Adjusted Trial Balance |
|||
|
June 30, 2018 |
|||
|
Balance |
|||
|
Account Title |
Debit |
Credit |
|
|
Cash |
$5,000 |
||
|
Accounts Receivable |
5,500 |
||
|
Office Supplies |
2,400 |
||
|
Prepaid Insurance |
2,700 |
||
|
Land |
13,200 |
||
|
Building |
79,000 |
||
|
Accumulated Depreciation—Building |
$25,300 |
||
|
Accounts Payable |
19,400 |
||
|
Interest Payable |
8,000 |
||
|
Salaries Payable |
1,700 |
||
|
Unearned Revenue |
700 |
||
|
Notes Payable (long-term) |
45,000 |
||
|
Common Stock |
6,000 |
||
|
Retained Earnings |
35,000 |
||
|
Dividends |
26,000 |
||
|
Service Revenue |
47,800 |
||
|
Insurance Expense |
3,900 |
||
|
Salaries Expense |
32,600 |
||
|
Supplies Expense |
900 |
||
|
Interest Expense |
8,000 |
||
|
Utilities Expense |
1,800 |
||
|
Depreciation Expense—Building |
7,900 |
||
|
Total |
$188,900 |
$188,900 |
|
|
1. |
Prepare the company's income statement for the year ended
June 30 comma 2018June 30, 2018. |
|
2. |
Prepare the company's statement of retained earnings for the
year ended
June 30 comma 2018June 30, 2018. |
|
3. |
Prepare the company's classified balance sheet in report form
at
June 30, 2018. |
|
4. |
Journalize the closing entries. |
|
5. |
T-accounts have been opened using the balances from the adjusted trial balance. Post the closing entries to the T-accounts. |
|
6. |
Prepare the company's post-closing trial balance at
JJune 30, 2018. |
In: Accounting
|
On June 15, 2016, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $400 million. The expected completion date is April 1, 2018, just in time for the 2018 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): |
| 2016 | 2017 | 2018 | |||||||
| Costs incurred during the year | $ | 90 | $ | 60 | $ | 80 | |||
| Estimated costs to complete as of December 31 | 150 | 50 | — | ||||||
| Required: | |
| 1. |
Compute the revenue and gross profit will Sanderson report in its 2016, 2017, and 2018 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion. (Enter your answers in million. Use percentages as calculated and rounded in the table below to arrive at your final answer. Losses and expenses should be indicated with a minus sign.) |
| 2. |
Compute the amount of revenue and gross profit or loss to be recognized in 2016, 2017, and 2018 using the completed contract method. (Enter your answers in millions.) |
| 3. |
Suppose the estimated costs to complete at the end of 2017 are $150 million instead of $50 million. Compute the amount of revenue and gross profit or loss to be recognized in 2017 using the percentage of completion method. (Do not round intermediate calculations. Enter your answer in millions. Round your answers to 1 decimal place.) |
In: Accounting
Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018:
| Gibson | Davis | ||||||
| Sales | $ | (847,000 | ) | $ | (470,000 | ) | |
| Cost of goods sold | 390,000 | 207,000 | |||||
| Operating expenses | 271,000 | 77,000 | |||||
| Dividend income | (24,000 | ) | 0 | ||||
| Net income | $ | (210,000 | ) | $ | (186,000 | ) | |
| Retained earnings, 1/1/18 | $ | (753,000 | ) | $ | (491,000 | ) | |
| Net income | (210,000 | ) | (186,000 | ) | |||
| Dividends declared | 80,000 | 40,000 | |||||
| Retained earnings, 12/31/18 | $ | (883,000 | ) | $ | (637,000 | ) | |
| Cash and receivables | $ | 254,100 | $ | 83,000 | |||
| Inventory | 544,000 | 310,000 | |||||
| Investment in Davis | 603,900 | 0 | |||||
| Buildings (net) | 536,000 | 680,000 | |||||
| Equipment (net) | 408,000 | 445,000 | |||||
| Total assets | $ | 2,346,000 | $ | 1,518,000 | |||
| Liabilities | $ | (833,000 | ) | $ | (541,000 | ) | |
| Common stock | (630,000 | ) | (340,000 | ) | |||
| Retained earnings, 12/31/18 | (883,000 | ) | (637,000 | ) | |||
| Total liabilities and stockholders' equity | $ | (2,346,000 | ) | $ | (1,518,000 | ) | |
Gibson acquired 60 percent of Davis on April 1, 2018, for $603,900. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $84,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $402,600. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2018.
Prepare a consolidated income statement for the year ending December 31, 2018.
Determine the consolidated balance for each of the following accounts as of December 31, 2018:
In: Accounting
Use the financial statements below for problems 4 to 7
Balance Sheet
|
Assets |
2017 |
2018 |
|
|
Cash |
$14,000 |
$9,282 |
|
|
Short-term investments. |
48,600 |
18,000 |
|
|
Accounts receivable |
351,200 |
632,160 |
|
|
Inventories |
710,200 |
1,287,360 |
|
|
Total current assets |
$1,124,000 |
$1,946,802 |
|
|
Gross fixed assets |
491,000 |
1,202,950 |
|
|
Less: accumulated depreciation |
146,200 |
263,160 |
|
|
Net fixed assets |
$344,800 |
$939,790 |
|
|
Total assets |
$1,468,800 |
$2,886,592 |
|
|
Liabilities and equity |
2017 |
2018 |
|
|
Accounts payable |
$145,600 |
$324,000 |
|
|
Notes payable |
200,000 |
720,000 |
|
|
Accruals |
136,000 |
284,960 |
|
|
Total current liabilities |
$481,600 |
$1,328,960 |
|
|
Long-term debt |
323,432 |
1,000,000 |
|
|
Common stock (100,000 shares) |
460,000 |
460,000 |
|
|
Retained earnings |
203,768 |
97,632 |
|
|
Total equity |
$663,768 |
$557,632 |
|
|
Total liabilities and equity |
$1,468,800 |
$2,886,592 |
|
Income Statement |
|||
|
2017 |
2018 |
||
|
Sales |
$5,432,000 |
$6,834,400 |
|
|
Cost of goods sold |
2,864,000 |
4,200,000 |
|
|
Other expenses |
340,000 |
720,000 |
|
|
Depreciation |
18,900 |
116,960 |
|
|
Total operating costs |
$3,222,900 |
$5,036,960 |
|
|
EBIT |
$2,209,100 |
$1,797,440 |
|
|
Interest expense |
62,500 |
176,000 |
|
|
Pretax earnings |
$2,146,600 |
$1,621,440 |
|
|
Taxes (40%) |
858,640 |
648,576 |
|
|
Net income |
$1,287,960 |
$972,864 |
4. Construct a common size balance sheets for 2017 and 2018. Comment on any changes in the percentages of assets and liabilities.
5. Construct a common size income statement 2017 and 2018. Comment on any of the changes in the composition of the income statement.
In: Finance
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc. for $622,000 cash. The acquisition-date fair value of the noncontrolling interest was $69,000. At January 1, 2016, Star’s net assets had a total carrying amount of $483,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $52,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $45,500 in 2016 and $52,000 in 2017. Each year since the acquisition, Star has declared a $13,000 dividend. At January 1, 2018, Pride’s retained earnings show a $162,500 balance.
Selected account balances for the two companies from their separate operations were as follows:
| Pride | Star | |||||
| 2018 Revenues | $ | 323,800 | $ | 185,400 | ||
| 2018 Expenses | 227,800 | 126,900 | ||||
1) What is consolidated net income for 2018?
Multiple choice:
$123,000.
$109,000.
$125,900.
$154,500.
2. Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2018 consolidated balance sheet?
Multiple Choice
$273,000.
$162,500.
$414,000.
$186,400.
In: Accounting
Eximco Corporation (based in Champaign, Illinois) has a number of transactions with companies in the country of Mongagua, where the currency is the mong. On November 30, 2017, Eximco sold equipment at a price of 500,000 mongs to a Mongaguan customer that will make payment on January 31, 2018. In addition, on November 30, 2017, Eximco purchased raw materials from a Mongaguan supplier at a price of 300,000 mongs; it will make payment on January 31, 2018. To hedge its net exposure in mongs, Eximco entered into a two-month forward contract on November 30, 2017, to deliver 200,000 mongs to the foreign currency broker in exchange for $104,000. Eximco properly designates its forward contract as a fair value hedge of a foreign currency receivable. The following rates for the mong apply:
Date Spot Rate Forward Rate (to January 31, 2018)
November 30, 2017 $ 0.53 $ 0.52
December 31, 2017 0.50 0.48
January 31, 2018 0.49 N/A
Eximco's incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901.
a. Prepare all journal entries, including December 31 adjusting entries, to record these transactions and the forward contract.
b. What is the impact on net income in 2017?
c. What is the impact on net income in 2018?
In: Accounting