Flemington Bikes sells racing bikes on credit. It uses the ageing of accounts receivable method for estimating bad debts. On 30 June 2020, the Allowance for Doubtful Debts account had a balance of $8,800 CR before any adjustments. An ageing analysis of the account receivable balance as at 30 June 2020 is provided below. The uncollectable percentages for each age group are based on past experience and are shown next to the respective aged balances. Flemington Bikes is registered for goods and services tax (GST).
|
Balance |
% estimated uncollectable |
||
|
Accounts not yet due Accounts overdue: 1–30 days 31–60 days 61–120 days 121 days and over |
$175,600 61,000 44,000 25,400 20,500 |
0.5 2 10 25 40 |
|
|
$326 500 |
REQUIRED:
(Narrations are not required).
In: Accounting
QUESTION TWO
Flemington Bikes sells racing bikes on credit. It uses the ageing of accounts receivable method for estimating bad debts. On 30 June 2020, the Allowance for Doubtful Debts account had a balance of $8,800 CR before any adjustments. An ageing analysis of the account receivable balance as at 30 June 2020 is provided below. The uncollectable percentages for each age group are based on past experience and are shown next to the respective aged balances. Flemington Bikes is registered for goods and services tax (GST).
|
Balance |
% estimated uncollectable |
||
|
Accounts not yet due Accounts overdue: 1–30 days 31–60 days 61–120 days 121 days and over |
$175,600 61,000 44,000 25,400 20,500 |
0.5 2 10 25 40 |
|
|
$326 500 |
REQUIRED:
(Narrations are not required).
In: Accounting
|
Number of Days Outstanding |
||||||
|
TOTAL |
Current |
30 |
31-60 |
61-90 |
Over 90 |
|
|
Accounts receivable |
155,000 |
120,000 |
12,000 |
10,000 |
5,000 |
8,000 |
|
% Uncollectible |
1% |
3% |
8% |
17% |
40% |
|
|
Estimated bad debts |
1,200 |
|||||
Instructions
|
(a) |
Number of Days Outstanding |
|||||
|
TOTAL |
Current |
30 |
31-60 |
61-90 |
Over 90 |
|
|
Accounts receivable |
155,000 |
120,000 |
12,000 |
10,000 |
5,000 |
8,000 |
|
% Uncollectible |
1% |
3% |
8% |
17% |
40% |
|
|
Estimated bad debts |
1,200 |
|||||
|
Date |
Account Titles and Explanation |
Ref |
Debit |
Credit |
|
b) |
||||
|
c) |
||
Dec. 16 Received a $4,000, 6 month, 9% note in exchange for Weinberg’s outstanding accounts receivable.
Dec. 31 Accrued interest revenue on all notes receivable.
|
Date |
Account Titles and Explanation |
Ref |
Debit |
Credit |
In: Accounting
The Shareholders’ Equity section of Hamilton Design Company’s December 31, 2019, balance sheet appeared as follows:
| Contributed Capital: | |
| Preferred stock, 6%, $100 par (10,000 shares authorized, 1,250 shares issued) | $125,000 |
| Additional paid-in capital on preferred stock | $55,000 |
| Common stock, $10 par (60,000 shares authorized, 15,000 shares issued | $150,000 |
| Additional paid-in capital on common stock | $105,000 |
| Total contributed capital | $435,000 |
| Retained earnings | $78,000 |
| Contributed capital and retained earnings | $513,000 |
| Less: Treasury Stock (300 shares of common at $14 per share) | ($4,200) |
| Total Shareholders' Equity | $508,800 |
During 2020, the company entered into the following transactions affecting shareholders’ equity:
1. Issued 250 shares of preferred stock at $160 per share.
2. Issued 3,000 shares of common stock at $16 per share.
3. Declared and issued a 15% stock dividend. On the date of declaration, the market price of the shares was $19 per share.
4. Reacquired 200 of its own common shares as treasury stock for $15 per share.
5. Reissued 250 shares of treasury stock at $17 per share (FIFO basis).
6. Net income for 2020 was $70,400. Dividends of $25,000 were distributed.
Instructions: Prepare a statement of stockholders’ equity for the year ended December 31, 2020, for Hamilton. Use the “columnar format” show in your textbook.
***Please show all supporting calculations.
In: Accounting
9- Suppose that a company has 2 buildings, one for investment (A) and one for administrative (B) purposes. Both properties have an initial cost of 1.000.000 TL. The company does not use the cost model and both properties have 10 years of useful lives. A is revalued one year later and the revalued amount is 900.000 TL. B is also revalued one year later and the revalued amount is 1.200.000 TL. After the revaluation the company immediately sells A at 950.000 TL and sells B at 800.000 TL. What is the profit/loss amount in the income statement for all of the transactions above?
50.000 loss
250.000 loss
100.000 profit
150.000 profit
8- A PPE is acquired for 10.000 TL at the beginning of 2016. It had a useful life of 5 years. On January 1, 2018 the asset was revalued to 12.000 TL. What would be the comprehensive income in year 2018?
6.000
4.000
2.000
3.000
4- A company sells a plant asset which originally cost 120.000 TL for 40.000 TL on December 31, 2019. The accumulated depreciation account had a balance of 48.000 TL after the current year's depreciation of 12.000 TL had been recorded. The company should recognize a(n)...
80.000 TL loss on disposal
35.000 TL gain on disposal
32.000 TL loss on disposal
20.000 TL loss on disposal
In: Accounting
Salo inc. has assets in place that are financed through debt for $245,000,000 and equity for $53,000,000. At the moment the return on equity is 15% and the company keeps a constant debt-to-equity policy. The company plans to start a new project that will be managed separately from the other company's operations. The project has a 5-year life. The company needs to acquire new assets for $45,000,000. The company thinks to adopt a constant debt policy for this project and plans to raise a debt amount that is 1.4 the raised equity. In order to raise financial resources for the new project, Salo uses as lead underwriter Lindberg Bank, which charges a 3.6% spread to raise equity, and a 0% spread to raise debt. The new project will produce a constant expected net income of $2,500,000, the depreciation tax shield is as risky as the company's debt, while the project's assets are as risky as the company's assets in place. Also, the newly acquired assets will be depreciated straight-line. The corporate tax rate is 32% and the company can borrow at an interest rate of 3.55%.
(a) Calculate the new project's initial (time 0) cash flow, taking into account all side effects (that is, issuance costs).
(b) What is the annual after-tax cash flow from assets from the new project at the end of each of the five years of its life?
(c) Knowing that the depreciation tax shield is as risky as the company's debt, what is the project's NPV?
In: Finance
On January 1, 2010, Porter Company purchased an 80% interest in the capital stock of Salem Company for $850,000. At that time, Salem Company had capital stock of $550,000 an retained earnings of $80,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: Fair Value in Excess of Book Value Equipment............. $130,000 Land............. 65,000 Inventory............. 40,000 The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 2010. The equipment had a remaining life of five years on January 1, 2010. The inventory was sold in 2010.
Salem Company’s net income and dividends declared in 2010 and 2011 were as follows: Year 2010 Net Income of $100,000; Dividends Declared of $25,000 Year 2011 Net Income of $110,000; Dividends Declared of $35,000
Required:
A. Prepare a Computation and Allocation Schedule for the difference between book value of equity acquired and the value implied by the purchase price.
B. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2010. (It is not necessary to prepare the worksheet.) 1. Assume the use of the cost method. 2. Assume the use of the partial equity method. 3. Assume the use of the complete equity method.
C. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2011.
In: Accounting
On January 1, 2011, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $5,003,400 was paid in cash. At the purchase date, the balance sheet of Singer Company included the following:
| Current assets | $2,904,100 | |
| Long-term assets | 3,888,100 | |
| Other assets | 764,000 | |
| Current liabilities | 1,547,100 | |
| Common stock, $20 par value | 2,001,400 | |
| Other contributed capital | 1,888,600 | |
| Retained earnings | 1,612,000 |
Additional data on Singer Company for the four years following the purchase are:
| 2011 | 2012 | 2013 | 2014 | |||||||
| Net income (loss) | $2,000,500 | $478,300 | ($180,500 | ) | ($321,700 | ) | ||||
| Cash dividends paid, 12/30 | 497,800 | 497,800 | 497,800 | 497,800 | ||||||
Prepare journal entries under each of the following methods to record the purchase and all investment-related subsequent events on the books of Perelli Company for the four years, assuming that any excess of purchase price over equity acquired was attributable solely to an excess of market over book values of depreciable assets (with a remaining life of 15 years). (Assume straight-line depreciation.)
|
(b) Perelli uses the partial equity method to account for its investment in Singer. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. |
In: Accounting
Problem 12-22 Accept or Reject a Special Order [LO12-4]
| Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below: |
| Unit | Total | ||||
| Direct materials | $ | 15 | $ | 690,000 | |
| Direct labor | 10 | 460,000 | |||
| Variable manufacturing overhead | 3 | 138,000 | |||
| Fixed manufacturing overhead | 7 | 322,000 | |||
| Variable selling expense | 2 | 92,000 | |||
| Fixed selling expense | 6 | 276,000 | |||
| Total cost | $ | 43 | $ | 1,978,000 | |
| The Rets normally sell for $48 each. Fixed manufacturing overhead is constant at $322,000 per year within the range of 39,000 through 46,000 Rets per year. |
| Required: | |
| 1. |
Assume that due to a recession, Polaski Company expects to sell only 39,000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 7,000 units. This machine would cost $14,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted. |
| 2. |
Refer to the original data. Assume again that Polaski Company expects to sell only 39,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 7,000 Rets. The Army would pay a fixed fee of $1.40 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year? |
| 3. |
Assume the same situation as that described in (2) above, except that the company expects to sell 46,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 7,000 Rets. If the Army’s order is accepted, by how much will profits increase or decrease from what they would be if the 7,000 Rets were sold through regular channels? |
In: Accounting
| Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 34,000 Rets per year. Costs associated with this level of production and sales are given below: |
| Unit | Total | ||||
| Direct materials | $ | 25 | $ | 850,000 | |
| Direct labor | 6 | 204,000 | |||
| Variable manufacturing overhead | 3 | 102,000 | |||
| Fixed manufacturing overhead | 5 | 170,000 | |||
| Variable selling expense | 2 | 68,000 | |||
| Fixed selling expense | 6 | 204,000 | |||
| Total cost | $ | 47 | $ | 1,598,000 | |
| The Rets normally sell for $52 each. Fixed manufacturing overhead is constant at $170,000 per year within the range of 29,000 through 34,000 Rets per year. |
| Required: | |
| 1. |
Assume that due to a recession, Polaski Company expects to sell only 29,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 5,000 units. This machine would cost $10,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted. |
| 2. |
Refer to the original data. Assume again that Polaski Company expects to sell only 29,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $2.00 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year? |
| 3. |
Assume the same situation as that described in (2) above, except that the company expects to sell 34,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. If the Army’s order is accepted, by how much will profits increase or decrease from what they would be if the 5,000 Rets were sold through regular channels? |
In: Accounting