Presented below is information that relates to Halifax Limited for 2020:
Accounts Payable ........................................................................................................ 49,000
Accounts Receivable .................................................................................................... 78,000
Bond Payable....................................................................................................... ..... 600,000
Cash dividends declared on common shares.................................................................... 34,000
Collections of credit sales....................................................................................... $1,100,000
Cost of goods sold.................................................................................................... 1,100,000
Equipment ................................................................................................................... 85,000
Gain from transactions in foreign currencies (pre-tax)................................................... 220,000
Inventory.................................................................................................................... 120,000
Loss on sale of equipment .......................................................................................... 350,000
Loss from early debt repayment .................................................................................. 340,000
Loss resulting from calculation error on depreciation charge in 2019.............................. 460,000
Other expenses........................................................................................................... 120,000
Other revenues............................................................................................................ 180,000
Proceeds from issue of Halifax common shares............................................................... 60,000
Retained earnings, January 1, 2020.............................................................................. 800,000
Sales........................................................................................................................ 1,900,000
Selling and administrative expenses............................................................................. 290,000
Unrealized Gain FV-NI ........................................................................................ 20,000
Additional information to be included:
On September 1, 2020, Halifax sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, the discontinued segment incurred an operating loss (pre-tax) of $480,000. This loss is not included in any of the numbers shown above.
Instructions
In good form, prepare a multiple-step income statement for 2020. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year. Include Earnings Per Share.
In: Accounting
Presented below is information that relates to Halifax Limited for 2020:
Accounts Payable ........................................................................................................ 49,000
Accounts Receivable .................................................................................................... 78,000
Bond Payable....................................................................................................... ..... 600,000
Cash dividends declared on common shares.................................................................... 34,000
Collections of credit sales....................................................................................... $1,100,000
Cost of goods sold.................................................................................................... 1,100,000
Equipment ................................................................................................................... 85,000
Gain from transactions in foreign currencies (pre-tax)................................................... 220,000
Inventory.................................................................................................................... 120,000
Loss on sale of equipment .......................................................................................... 350,000
Loss from early debt repayment .................................................................................. 340,000
Loss resulting from calculation error on depreciation charge in 2019.............................. 460,000
Other expenses........................................................................................................... 120,000
Other revenues............................................................................................................ 180,000
Proceeds from issue of Halifax common shares............................................................... 60,000
Retained earnings, January 1, 2020.............................................................................. 800,000
Sales........................................................................................................................ 1,900,000
Selling and administrative expenses............................................................................. 290,000
Unrealized Gain FV-NI ........................................................................................ 20,000
Additional information to be included:
On September 1, 2020, Halifax sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, the discontinued segment incurred an operating loss (pre-tax) of $480,000. This loss is not included in any of the numbers shown above.
Instructions
In good form, prepare a multiple-step income statement for 2020. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year. Include Earnings Per Share.
In: Accounting
Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:
| Debit | Credit | ||||
| Accounts payable | $ | 60,000 | |||
| Accounts receivable | $ | 50,000 | |||
| Additional paid-in capital | 60,000 | ||||
| Buildings (net) (20-year life) | 140,000 | ||||
| Cash and short-term investments | 70,000 | ||||
| Common stock | 300,000 | ||||
| Equipment (net) (8-year life) | 240,000 | ||||
| Intangible assets (indefinite life) | 110,000 | ||||
| Land | 90,000 | ||||
| Long-term liabilities (mature 12/31/22) | 180,000 | ||||
| Retained earnings, 1/1/20 | 120,000 | ||||
| Supplies | 20,000 | ||||
| Totals | $ | 720,000 | $ | 720,000 | |
During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.
Matthews decided to use the equity method for this investment.
Required:
Using Excel
(A.) Prepare consolidation worksheet entries for December 31, 2020.
(B.) Prepare consolidation worksheet entries for December 31, 2021.
In: Accounting
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sheridan Company. The following information relates to this agreement.
1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years.
2. The fair value of the asset at January 1, 2020, is $77,000.
3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $9,000, none of which is guaranteed.
4. The agreement requires equal annual rental payments of $23,907.43 to the lessor, beginning on January 1, 2020.
5. The lessee’s incremental borrowing rate is 5%. The lessor’s implicit rate is 4% and is unknown to the lessee.
6. Sheridan uses the straight-line depreciation method for all equipment.
Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answers to 2 decimal places, e.g. 5,265.25. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Date Account Titles and Explanation Debit Credit enter an account title
(to record the lease)
(to record lease liability)
(to record expenses)
In: Accounting
| Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the investment as having no significant influence. | |||||||||
| The percentage of investment | 15% | Amount paid | $6,000,000 | ||||||
| On January 1, 2022 Sofie Company makes the following additional investment in Nut Corporation and changes to the equity method of reporting for this investment: | |||||||||
| The additional percentage of investment | 25% | Additional amount paid | $15,000,000 | ||||||
| December 31, 2020 | December 31, 2021 | ||||||||
| Fair value of the 15% investment is as follows: | $6,200,000 | $6,450,000 | |||||||
| Nut Corporation reported the following amounts for the years: | |||||||||
| 2020 | 2021 | 2022 | |||||||
| Net Income | $150,000 | $200,000 | $250,000 | ||||||
| Cash dividends (Paid at year-end) | $50,000 | $80,000 | $100,000 | ||||||
| Additional information: Nut Corporation reported no comprehensive income and any basis difference is attributed to goodwill. | |||||||||
| Required: You should use cell references in providing a number or preparing a calculations by referencing the data above. Prepare you answer in the solution area provided. | |||||||||
| A. Prepare all the journal entries that Sofie Company would record for the investment in Nut Corporation for 2020, 2021, and 2022. Journal entries should be set up in good form. | |||||||||
| You need to provide dates, use appropriate account titles, and include an explanation below each journal entry. | |||||||||
| B. Develop a table showing the calculation of what the amount Sofie Corporation will report on the balance sheet for the investment in Nut Corporation on December 31, 2022. | |||||||||
| Solution: | |||||||||
In: Accounting
On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000.
The following trial balances of the two companies are prepared on December 31, 2020.
|
Parent |
Subsidiary |
|
|
Investment in Sub |
352,000 |
|
|
Current Assets |
132,000 |
180,000 |
|
Inventory |
60,000 |
40,000 |
|
Equipment |
350,000 |
300,000 |
|
Accumulated Depreciation |
(120,000) |
(50,000) |
|
Goodwill |
||
|
Bond Payable |
(134,000) |
(80,000) |
|
CS-Par |
(100,000) |
|
|
PIC-Par |
(200,000) |
|
|
RE-Par |
(200,000) |
|
|
CS-Sub |
(40,000) |
|
|
PIC-Sub |
(120,000) |
|
|
RE-Sub |
(190,000) |
|
|
Sales |
(550,000) |
(400,000) |
|
Expense |
450,000 |
350,000 |
|
Depreciation Expense |
||
|
Sub Income |
(40,000) |
|
|
Dividend Declared - Sub |
10,000 |
|
|
Totals |
0 |
0 |
Required:
d. Prepare the consolidated worksheet.
e. Prepare the 2020 consolidated income statement and balance sheet.
In: Accounting
The financial statements for Waverley Ltd are provided below:
Waverley Ltd
Comparative Balance Sheet
As at 30 June 2019 and 2020
|
2019 |
2020 |
|
|
Assets |
||
|
Cash At Bank |
167,000 |
215,000 |
|
Accounts Receivable |
213,000 |
158,000 |
|
Inventory |
68,000 |
73,000 |
|
Prepaid Rent |
4,000 |
5,000 |
|
Buildings |
320,000 |
350,000 |
|
Accumulated Depreciation – Buildings |
(108,000) |
(132,000) |
|
Equipment |
67,000 |
78,000 |
|
Accumulated Depreciation – Equipment |
(25,000) |
(26,000) |
|
706,000 |
721,000 |
|
|
Liabilities |
||
|
Accounts Payable |
236,000 |
228,000 |
|
Dividend Payable |
12,000 |
13,000 |
|
Salary Payable |
18,000 |
20,000 |
|
Tax Payable |
16,000 |
17,000 |
|
Bank Loan |
158,000 |
171,000 |
|
440,000 |
449,000 |
|
|
Equity |
||
|
Capital |
170,000 |
164,000 |
|
Retained Earnings |
96,000 |
108,000 |
|
266,000 |
272,000 |
Waverley Ltd
Income Statement
For the Year Ended at 30 June 2020
|
Sales |
1,000,000 |
|
|
COGS |
(450,000) |
|
|
Gross Profit |
550,000 |
|
|
Profit on sale of Equipment |
2,000 |
|
|
Rent |
42,000 |
|
|
Salary |
400,000 |
|
|
Interest |
12,000 |
|
|
Depreciation Expense – Buildings |
13,000 |
|
|
Depreciation Expense – Equipment |
15,000 |
|
|
(482,000) |
||
|
Net Profit before Tax |
70,000 |
|
|
Less Taxation expense |
(21,000) |
|
|
Net Profit |
49,000 |
Required:
Prepare an extract of the Cash Flow Statement for the year ended 30 June 2020 showing Cash Flows from Operating Activities AND Cash Flows from Financing Activities. Show all workings.
In: Accounting
The following tables summarizes the 2019 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year.
| INCOME STATEMENT, 2019 | ||||
| (Figures in $ thousands) | ||||
| Sales | $ | 1,480 | (40% of average assets)a | |
| Costs | 1,110 | (75% of sales) | ||
| Interest | 31 | (5% of debt at start of year)b | ||
| Pretax profit | $ | 339 | ||
| Tax | 136 | (40% of pretax profit) | ||
| Net income | $ | 203 | ||
a Assets at the end of 2018 were $3,600,000.
b Debt at the end of 2018 was $620,000.
| BALANCE SHEET, YEAR-END | ||||||||||
| (Figures in $ thousands) | ||||||||||
| Assets | $ | 3,800 | Debt | $ | 620 | |||||
| Equity | 3,180 | |||||||||
| Total | $ | 3,800 | $ | 3,800 | ||||||
a. What is the implied level of assets at the end of 2020? (Do not round your intermediate calculations. Enter your answer in thousands.)
b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2020? (Do not round your intermediate calculations. Enter your answer in thousands.)
c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2020? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)
In: Finance
The following tables summarizes the 2019 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 15% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 3% of debt at the start of the year.
| INCOME STATEMENT, 2019 | ||||
| (Figures in $ thousands) | ||||
| Sales | $ | 1,080 | (40% of average assets)a | |
| Costs | 540 | (50% of sales) | ||
| Interest | 26 | (5% of debt at start of year)b | ||
| Pretax profit | $ | 514 | ||
| Tax | 103 | (20% of pretax profit) | ||
| Net income | $ | 411 | ||
a Assets at the end of 2018 were $2,600,000.
b Debt at the end of 2018 was $520,000.
| BALANCE SHEET, YEAR-END | ||||||||||
| (Figures in $ thousands) | ||||||||||
| Assets | $ | 2,800 | Debt | $ | 520 | |||||
| Equity | 2,280 | |||||||||
| Total | $ | 2,800 | $ | 2,800 | ||||||
a. What is the implied level of assets at the end of 2020? (Do not round your intermediate calculations. Enter your answer in thousands.)
b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2020? (Do not round your intermediate calculations. Enter your answer in thousands.)
c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2020? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)
In: Finance
Pineapples Corporation is in need of cash. It issues bonds with a $2 million face value. The bonds have a 8.48% coupon rate. The market rate is 6%. The bonds have a life of 10 years, and are compounded semiannually. Pineapples Corp. issues the bonds on 1/1/20. Please provide all journal entries that Pineapples Corp. must record during 2020 in relation to these bonds. (HINT: There are a total of three journal entries which must be made.) You may round your answers to the nearest dollar.
Show your work here !!!!
Record your FIRST of three journal entry here for 2020:
Record your SECOND of three journal entry here for 2020:
Record your THIRD journal entry here for 2020:
Additional Question (A) Related to Pineapples Corp: What is the journal entry Pineapples Corp. will record when it retires the bonds in 10 years (after/not including the final coupon payment):
Additional Question (B) Related to Pineapples Corp: Over the life of the bond, how much interest expense will Pineapples Corp. recognize? (Show your calculation in the space below for full credit)
Additional Question (C) Related to Pineapples Corp: If the coupon rate was 6% (instead of 8.48%) and all other facts remained the same, what would be the price of the bond at issuance? (Show your work or provide your explanation in the space below for full credit.)
In: Accounting