# Accounting Homework

Problem 1 (10 Points)

Jackson Browne Corporation is authorized to issue 1,000,000 shares of \$1 par value common stock. During 2021, its first year of operation, the company has the following stock transactions.

Jan.     1     Paid the state \$10,000 for incorporation fees.

Jan.     15        Issued 400,000 shares of stock at \$5 per share.

July      2          Issued 110,000 shares of stock for land. The land had an asking price of \$800,000.  The stock is currently selling on a national exchange at \$6 per share.

Sept.    5          Purchased 12,000 shares of common stock for the treasury at \$7 per share.

Dec.    6          Sold 8,000 shares of the treasury stock at \$10 per share.

Instructions

Indicate the accounts and their respective balances that are increased and/or decreasedin the above transactions for Jackson Browne Corporation.You must show your computations to receive full credit.

Problem 2 (12 Points)

The following items were shown on the balance sheet of ELO Corporation on December 31, 2021:

Stockholders’ equity

Paid-in capital

Capital stock

Common stock, \$6 par value, 800,000 shares

authorized; ______ shares issued and ______ outstanding………………..    \$3,000,000

Additional paid-in capital

In excess of par……………………………………………………………………………..      1,500,000

Total paid-in capital…………………………………………………………………..      4,500,000

Retained earnings…………………………………………………………………………………….      1,850,000

Total paid-in capital and retained earnings………………………………………..      6,350,000

Less: Treasury stock (10,000 shares)…………………………………………………………           50,000

Total stockholders’ equity………………………………………………………………..    \$6,300,000

Instructions

Complete the following statements and show your computations.

(a)   The number of shares of common stock issued was _______________.

(b)   The number of shares of common stock outstanding was ____________.

(c)   The total sales price of the common stock when issued was \$____________.

(d)   The cost per share of the treasury stock was \$_______________.

(e)   The average issue price of the common stock was \$______________.

(f)    Assuming that 25% of the treasury stock is sold at \$8 per share, the balance in the Treasury Stock account would be \$_______________.

Problem 3 (10 Points)

Journey Company had the following transactions involving notes payable.

October1, 2021     Borrows \$300,000 from Washington State Bank by signing a 6-month, 4% note.

Dec. 31, 2021       prepares the adjusting entry.

April 1, 2022          Pays principal and interest to Washington State Bank.

Instructions

Indicate the accounts and their respective balances that are increased and/or decreased for each of the above transactions.You must show all your calculations to receive full credit.

Problem 4 (18 Points)

Turner Inc. is considering two alternatives to finance its construction of a new \$6 million plant.

(a)   Issuance of 600,000 shares of common stock at the market price of \$10 per share.

(b)   Issuance of \$6 million, 4% bonds at par.

Instructions

Complete the following table.You MUST show your work to receive full credit.

Issue Stock                 Issue Bonds

Income before interest and taxes                               \$20,000,000                \$20,000,000

Interest expense from bonds

_________                  _________

Income before income taxes                                      \$                                  \$

Income tax expense (30%)                                         _________                  _________

Net income                                                                  \$________                  \$________

Outstanding shares                                                    _________                    4,000,000

Earnings per share                                                     _________                  _________

Problem 5 (15 Points)

The Band Company was organized on January 1. During the first year of operations, the following expenditures and receipts were recorded in random order in the account, Land.

Expenditures

1. Cost of real estate purchased as a plant site

(land \$230,000 and old building \$30,00)                                                               \$  260,000

1. Accrued real estate taxes paid at the time of the purchase of the real estate.            45,000
2. Cost of demolishing building to make land suitable for construction of a new

building.                                                                                                                      35,000

1. Architect’s fees on building plans.                                                                                 30,000
2. Installation cost of fences around the building                                                            25,000
3. Excavation costs for new building.                                                                                50,000
4. Cost of filling and grading the land.                                                                               45,000  8.         Full payment to building contractor.                                                                                            840,000
5. Cost of parking lots and driveways.                                                                              65,000
6. Real estate taxes paid for the current year on the land.                                               20,000

Total                                                                                                                  \$1,415,000

Receipts

1. Proceeds from salvage of demolished building                                                            20,000

Total                                                                                                                       \$20,000

Instructions

Analyze the foregoing transactions using the following tabular arrangement. Insert the number of each transaction in the Item space and insert the amounts in the appropriate columns and show the total for each column.

Land

ItemLand                  Buildings                  Improvements          Other                     Account Title

Problem 6 (10 points)

Bob Seger Company purchased equipment on January 1, 2021 for \$120,000. It is estimated that the equipment will have a \$30,000 salvage value at the end of its 10-year useful life. It is also estimated that the equipment will produce 90,000 units over its 10-year life.You must show all of your calculations.

Instructions

Answer the following independent questions.

1. Compute the amount of depreciation expense for the year ended December 31, 2021, using the straight-line method of depreciation.
2. If 20,000 units of product were produced in 2021, what is the book value of the equipment at December 31, 2021? The company uses the units-of-activity depreciation method.

Problem 7 (10 Points)

(a)    Cinema Paradiso Company purchased equipment on January 1, 2013 for \$150,000 and estimated a \$30,000 salvage value at the end of the equipment’s 10-year useful life. At December 31, 2019, there was \$84,000 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2020, the equipment was sold for \$70,000.

Indicate the accounts that are increased and/or decreased and by which amount to remove the equipment from the books of Cinema Paradiso Company on March 31, 2020.You must show all of your calculations to receive full credit

(b)    Assume the same facts as above, except the equipment was sold for \$50,000

Indicate which accounts are increased and /or decreased and by which amountto record the disposition of the machine.  You must show all your work to receive full credit.

.

Problem 8 (20 Points)

The Killers Pesticide Company had a \$600 balance in Allowance for Doubtful Accounts at December 31, 2022, before the current year’s provision for uncollectible accounts. An aging of the accounts receivable revealed the following:

Estimated Percentage

Uncollectible

Current Accounts                                            \$120,000                               2%

1–30 days past due                                            60,000                               4%

31–60 days past due                                          50,000                               6%

61–90 days past due                                          30,000                             15%

Over 90 days past due                                       20,000                             25%

Total Accounts Receivable                             \$280,000

Instructions: You MUST show your work to receive full credit.

(a)  Determine the desired ending balance for Allowance for Doubtful Accounts

(b)   Determine the amount to recognize as bad debt expense on December 31, 2022.

(c)What amount that is reported as the net balance for Accounts Receivable as of December 31, 2022 on the Balance Sheet?

Problem 9 (20 point)

Muse Company uses the periodic inventory method and had the following inventory information available:

Units               Unit Cost           Total Cost

1/1         Beginning Inventory                     500                    \$5                   \$2,500

1/20       Purchase                                     700                    \$6                     4,200

7/25       Purchase                                     900                    \$7                     6,300

10/20     Purchase                                     600                    \$9                     5,400

2,700                                         \$18,400

A physical count of inventory on December 31 revealed that there were 700 units on hand.

Instructions

Answer the following independent questions and show computations supporting your answers.

1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is \$__________.

1. Assume that the company uses the Average-Cost method. The value of the ending inventory on December 31 is \$__________.

1. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is \$__________.

1. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less and by how much?

Problem 10 (20 Points)

Match the items below by entering the appropriate code letter in the space provided.

1. Cumulativedividend                                F.    Declaration date
2. Face value                                             G.    Market interest rate
3. Legal capital                                           H.    Payout ratio
4. Treasury stock                                       I.      Maturity date
5. Premium on bonds payable                   J.     Bond certificate
6. Discount on bonds payable

———  1.  Occurs when the contractual rate of interest is less than the market rate of interest.

——-    2.  A legal document that indicates the face value of the bonds and other data.

——      3.  The rate investors demand for loaning funds to a corporation.

____    4.  The amount that must be retained in the business for the protection of creditors.

———  5.  The time that the final payment on a bond is due from the bond issuer.

____     6.  The date the board of directors formally declares a dividend.

——-    7.  Amount of principal due at the maturity date of the bond.

____     8.  Preferred stockholders have a right to receive current and unpaid prior-year dividends before common stockholders receive any dividends.

____     9.  Measures the percentage of earnings distributed in the form of dividends to common stockholders.

____  10.    Corporation’s own stock that has been reacquired by the corporation but not retired.

Problem 11 (20 Points)

Ennio Morricone Company had the following normal account balances on selected accounts:

Sales Revenue                                                     \$2,500,000

Advertising Expense                                                    65,000

Sales Returns and Allowances                                   41,500

Cost of Goods Sold                                                1,100,000

Common stock                                                         250,000

Dividends                                                                 150,000

Freight-Out                                                                 35,000

Income tax expense                                                   30,000

Interest Expense                                                          80,000

Salaries and Wages Expense                                  670,000

Utilities Expense                                                          15,000

Depreciation Expense                                               120,000

Interest Revenue                         40,000

Inventory                                                                     67,000

Retained earnings                                                     535,000

Insurance Expense                                                     20,000

Sales Discounts                                                          18,500

Instructions

1. Use the above information to prepare a multiple-step income statement for the year ended December 31, 2022.

Problem 12 (35 Points)

The financial statements of Spertramp Company appear below:

Supertramp COMPANY

Comparative Balance Sheet

December 31, 2022

_____________________________________________________________________________

Assets                                                                                                        2022                   2021

Cash …………………………………………………………………………………….   \$ 120,200           \$ 128,400

Debt investments ……………………………………………………………………      148,000              100,000

Accounts receivable (net) ………………………………………………………..      235,600              205,600

Inventory ………………………………………………………………………………..      252,000              231,000

Property, plant and equipment (net) ………………………………………….   1,298,000           1,040,600

Total assets …………………………………………………………………….. \$2,053,800         \$1,705,600

Liabilities and stockholders’ equity

Accounts payable …………………………………………………………………..   \$ 320,000          \$  290,800

Income taxes payable ……………………………………………………………..        87,000                84,000

Bonds payable ……………………………………………………………………….      440,000              400,000

Common stock ………………………………………………………………………      580,000              600,000

Retained earnings …………………………………………………………………..      626,800              330,800

Total liabilities and stockholders’ equity………………………………… \$2,053,800         \$1,075,600

Supertramp COMPANY

Income Statement

For the Year Ended December 31, 2022

Net sales (all on credit) ……………………………………………………………                            \$3,781,080

Cost of goods sold ………………………………………………………………….                              2,117,080

Gross profit ……………………………………………………………………………                              1,664,000

Expenses

Selling and administrative expenses …………………………………… \$1,000,000

Interest expense ……………………………………………………………….        44,000

Total expenses ……………………………………………………………                              1,044,000

Income before income taxes ……………………………………………………                                 620,000

Income tax expense ………………………………………………………………..                                 184,000

Net income …………………………………………………………………………….                             \$  436,000

Additional information:

1. Cash dividends of \$120,000 were declared and paid on common stock in 2022.
2. Weighted-average number of shares of common stock outstanding during 2022 was 100,000 shares.
3. Net cash provided by operating activities during 2022 was \$450,000
4. Capital expenditures during 2022 were \$270,000.

Instructions

Using the financial statements and additional information, compute the following ratios for the Supertramp Company for 2022.  You Must show all your computations to receive full credit.

1. Gross profit rate _________.

1. Return on common stockholders’ equity _________.

1. Return on assets _________.

1. Accounts receivable turnover _________.

1. Average collection period _________.

1. Inventory turnover _________.

1. Days in inventory _________.

1. Times interest earned _________.

1.      Asset turnover _________.

1. Free cash flow _________

1. Profit margin______________

1.      Payout ratio————————