East Company has the following ledger accounts and adjusted balances as of December 31, 2020. All accounts have normal balances. East’s income tax rate is 20%. East has 300,000 shares of $10 par Common Stock authorized and 85,000 shares of Common Stock outstanding.
Accounts Payable……………………………. 87,750
Accounts Receivable………………………… 707,100
Accumulated Depreciation-Building………… 168,750
Accumulated Depreciation-Equipment………. 140,000
Administrative Expenses……………………. 150,000
Allowance for Doubtful Accounts…………… 67,500
Bonds Payable……………………………….. 600,000
Building……………………………………..1,687,500
Cash…………………………………………. 97,750
Common Stock……………………………... 900,000
Cost of Goods Sold………………………….1,282,500
Dividends…………………………………… 75,000
Equipment…………………………………… 652,500
Income from Operations of Division Y…….. 135,000
(Division Y is a component of East Company)
Interest Revenue…………………………….. 90,000
Inventory……………………………………...945,000
Land (held for future use)...…………………. 675,000
Land (used for building)…………………….. 371,250
Loss from Sale of Division Y……………….. 270,000
(Division Y is a component of East Company)
Loss on Sale of Land……...…………………. 33,750
Mortgage Payable …………..………………. 813,550*
Paid-In Capital in Excess of Par…………….. 594,000
Premium on Bonds Payable……………...… 15,000
Prepaid Insurance……………………………. 33,750**
Retained Earnings, January 1, 2019………… 843,750
Sales Discounts………………………………. 43,500
Sales Returns and Allowances……………….112,500
Sales Revenue……………………………...3,453,750
Selling Expenses……………………………. 416,750
Trademark……………………………………101,250
Treasury Stock………………………………. 90,000
*$50,000 of the principal comes due in 2019.
**Two years insurance paid in advance.
Instructions:
Use this information to prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet.
In: Accounting
Headland Inc., a greeting card company, had the following statements prepared as of December 31, 2020.
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HEADLAND INC. |
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|---|---|---|---|---|---|---|
|
12/31/20 |
12/31/19 |
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|
Cash |
$6,100 |
$6,900 |
||||
|
Accounts receivable |
62,500 |
51,000 |
||||
|
Short-term debt investments (available-for-sale) |
34,800 |
18,100 |
||||
|
Inventory |
39,600 |
60,200 |
||||
|
Prepaid rent |
4,900 |
4,000 |
||||
|
Equipment |
154,500 |
130,100 |
||||
|
Accumulated depreciation—equipment |
(34,800 |
) |
(25,300 |
) |
||
|
Copyrights |
46,300 |
50,400 |
||||
|
Total assets |
$313,900 |
$295,400 |
||||
|
Accounts payable |
$46,000 |
$40,200 |
||||
|
Income taxes payable |
4,000 |
6,000 |
||||
|
Salaries and wages payable |
8,100 |
4,000 |
||||
|
Short-term loans payable |
8,000 |
10,000 |
||||
|
Long-term loans payable |
59,700 |
69,000 |
||||
|
Common stock, $10 par |
100,000 |
100,000 |
||||
|
Contributed capital, common stock |
30,000 |
30,000 |
||||
|
Retained earnings |
58,100 |
36,200 |
||||
|
Total liabilities & stockholders’ equity |
$313,900 |
$295,400 |
||||
|
HEADLAND INC. |
||||
|---|---|---|---|---|
|
Sales revenue |
$339,075 |
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|
Cost of goods sold |
175,000 |
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|
Gross profit |
164,075 |
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|
Operating expenses |
119,900 |
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|
Operating income |
44,175 |
|||
|
Interest expense |
$11,300 |
|||
|
Gain on sale of equipment |
2,000 |
9,300 |
||
|
Income before tax |
34,875 |
|||
|
Income tax expense |
6,975 |
|||
|
Net income |
$27,900 |
|||
Additional information:
| 1. | Dividends in the amount of $6,000 were declared and paid during 2020. | |
| 2. | Depreciation expense and amortization expense are included in operating expenses. | |
| 3. | No unrealized gains or losses have occurred on the investments during the year. | |
| 4. | Equipment that had a cost of $19,900 and was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows using the direct method.
(Show amounts in the investing and financing sections
that decrease cash flow with either a - sign e.g. -15,000 or in
parenthesis e.g. (15,000).)
|
HEADLAND INC. |
|---|
In: Accounting
Presented below is information related to equipment owned by Whispering Company at December 31, 2020.
| Cost | $9,990,000 | |
| Accumulated depreciation to date | 1,110,000 | |
| Expected future net cash flows | 7,770,000 | |
| Fair value | 5,328,000 |
Whispering intends to dispose of the equipment in the coming year.
It is expected that the cost of disposal will be $22,200. As of
December 31, 2020, the equipment has a remaining useful life of 4
years.
Correct answer iconYour answer is correct.
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Dec. 31 |
enter an account title to record the transaction on December 31, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2017 |
enter a debit amount |
enter a credit amount |
eTextbook and Media
List of Accounts
New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.
Prepare the journal entry (if any) to record depreciation expense for 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
eTextbook and Media
List of Accounts
Incorrect answer iconYour answer is incorrect.
The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $5,883,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $22,200. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Dec. 31 |
enter an account title to record the transaction on December 31, 2018 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2018 |
enter a debit amount |
In: Accounting
The stockholders’ equity accounts of Carla Company have the following balances on December 31, 2020.
| Common stock, $10 par, 288,000 shares issued and outstanding | $2,880,000 | |
| Paid-in capital in excess of par—common stock | 1,180,000 | |
| Retained earnings | 5,750,000 |
Shares of Carla Company stock are currently selling on the Midwest
Stock Exchange at $38.
Prepare the appropriate journal entries for each of the following
cases. (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.)
| (a) | A stock dividend of 7% is (1) declared and (2) issued. | |
|---|---|---|
| (b) | A stock dividend of 100% is (1) declared and (2) issued. | |
| (c) | A 2-for-1 stock split is (1) declared and (2) issued. |
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
(a) (1) |
enter an account title for case A to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case A to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
enter an account title for case A to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(a) (2) |
enter an account title for case A to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case A to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(b) (1) |
enter an account title for case B to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case B to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(b) (2) |
enter an account title for case B to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case B to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(c) (1) |
enter an account title for case C to record the declaration of the stock split |
enter a debit amount |
enter a credit amount |
|
enter an account title for case C to record the declaration of the stock split |
enter a debit amount |
enter a credit amount |
|
|
(c) (2) |
enter an account title for case C to record the issuance of the stock split |
enter a debit amount |
enter a credit amount |
|
enter an account title for case C to record the issuance of the stock split |
enter a debit amount |
enter a credit amount |
In: Accounting
On January 1, 2020, Sarasota Company purchased $432,000 worth of 8% bonds of Aguirre Co. for $398,642. The bonds were purchased to yield 10% interest. Interest is payable semi-annually, on July 1 and January 1. The bonds mature on January 1, 2025. Sarasota Company uses the effective interest method to amortize the discount or premium. On January 1, 2022, to meet its liquidity needs, Sarasota Company sold the bonds for $400,384, after receiving interest.
Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as FV-OCI. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1 |
|||
eTextbook and Media
List of Accounts
Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 5,275.)
| Schedule of Interest Revenue and Bond
Discount Amortization—Effective-Interest Method |
||||||||
| Date | Interest
Receivable Or Cash Received |
Interest Revenue |
Bond
Discount Amortization |
Carrying
Amount of Bonds |
||||
| 1/1/20 | $ | |||||||
| 7/1/20 | $ | $ | $ | |||||
| 12/31/20 | ||||||||
| 7/1/21 | ||||||||
| 12/31/21 | ||||||||
| 7/1/22 | ||||||||
| 12/31/22 | ||||||||
| 7/1/23 | ||||||||
| 12/31/23 | ||||||||
| 7/1/24 | ||||||||
| 12/31/24 | ||||||||
| Total | $ | $ | $ | |||||
eTextbook and Media
List of Accounts
Prepare the journal entries to record the semi-annual interest on July 1, 2020, and December 31, 2020. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
July 1 |
|||
|
Dec. 31 |
|||
eTextbook and Media
List of Accounts
Assuming the fair value of Aguirre bonds is $402,544 on December 31, 2021, prepare the necessary adjusting entry. (Assume that the fair value adjustment on December 31, 2020 was a debit of $3,645.) (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec. 31 |
|||
eTextbook and Media
List of Accounts
Prepare the journal entry to record the sale of the bonds on January 1, 2022, including reclassifying holding gains or losses to net income. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1 |
|||
|
(To adjust to fair value at date of disposal) |
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|
Jan. 1 |
|||
|
(To record disposal) |
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|
Jan. 1 |
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|
(To reclassify holding loss) |
In: Accounting
Ratchet Company uses budgets in controlling costs. The August
2020 budget report for the company’s Assembling Department is as
follows.
|
RATCHET COMPANY |
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|
Difference |
||||
|
|
|
|
Favorable |
|
| Variable costs | ||||
| Direct materials |
$53,760 |
$52,760 |
$1,000 |
Favorable |
| Direct labor |
61,440 |
58,340 |
3,100 |
Favorable |
| Indirect materials |
25,600 |
25,700 |
100 |
Unfavorable |
| Indirect labor |
19,200 |
18,730 |
470 |
Favorable |
| Utilities |
22,400 |
22,240 |
160 |
Favorable |
| Maintenance |
7,680 |
7,940 |
260 |
Unfavorable |
| Total variable |
190,080 |
185,710 |
4,370 |
Favorable |
| Fixed costs | ||||
| Rent |
10,500 |
10,500 |
–0– |
Neither Favorable nor Unfavorable |
| Supervision |
16,100 |
16,100 |
–0– |
Neither Favorable nor Unfavorable |
| Depreciation |
5,400 |
5,400 |
–0– |
Neither Favorable nor Unfavorable |
| Total fixed |
32,000 |
32,000 |
–0– |
Neither Favorable nor Unfavorable |
| Total costs |
$222,080 |
$217,710 |
$4,370 |
Favorable |
The monthly budget amounts in the report were based on an expected
production of 64,000 units per month or 768,000 units per year. The
Assembling Department manager is pleased with the report and
expects a raise, or at least praise for a job well done. The
company president, however, is unhappy with the results for August
because only 62,000 units were produced.
Prepare a budget report for August using flexible budget data. (List variable costs before fixed costs.)
In: Accounting
Ratchet Company uses budgets in controlling costs. The August
2020 budget report for the company’s Assembling Department is as
follows.
|
RATCHET COMPANY |
||||
|
Difference |
||||
|
|
|
|
Favorable |
|
| Variable costs | ||||
| Direct materials |
$53,760 |
$52,760 |
$1,000 |
Favorable |
| Direct labor |
61,440 |
58,340 |
3,100 |
Favorable |
| Indirect materials |
25,600 |
25,700 |
100 |
Unfavorable |
| Indirect labor |
19,200 |
18,730 |
470 |
Favorable |
| Utilities |
22,400 |
22,240 |
160 |
Favorable |
| Maintenance |
7,680 |
7,940 |
260 |
Unfavorable |
| Total variable |
190,080 |
185,710 |
4,370 |
Favorable |
| Fixed costs | ||||
| Rent |
10,500 |
10,500 |
–0– |
Neither Favorable nor Unfavorable |
| Supervision |
16,100 |
16,100 |
–0– |
Neither Favorable nor Unfavorable |
| Depreciation |
5,400 |
5,400 |
–0– |
Neither Favorable nor Unfavorable |
| Total fixed |
32,000 |
32,000 |
–0– |
Neither Favorable nor Unfavorable |
| Total costs |
$222,080 |
$217,710 |
$4,370 |
Favorable |
The monthly budget amounts in the report were based on an expected
production of 64,000 units per month or 768,000 units per year. The
Assembling Department manager is pleased with the report and
expects a raise, or at least praise for a job well done. The
company president, however, is unhappy with the results for August
because only 62,000 units were produced.
In September, 68,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August. (List variable costs before fixed costs.)
In: Accounting
In: Accounting
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In: Accounting
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In: Accounting