Accounting 200: Comprehensive Homework 3 (5 Parts)
Accounting 200 Comprehensive Homework 3 Part 1: At December 31, 2014, Cohen Fencing Company had the following trial balance. Cohen Fencing Company Unadjusted Trial Balance December 31, 2014 Dr Cr Cash 203,203 Accounts Receivable 60,000 Allowance for Doubtful Accounts 600 Short Term Note Receivable 24,000 Interest Receivable Prepaid Insurance 11,000 Supplies 6,000 Inventory 65,000 Equipment 175,000 Accumulated Depreciation 75,000 Copyright 48,000 Accounts Payable 35,000 Wages Payable Interest Payable Bonds Payable 200,000 Premium on Bonds Payable 11,103 Common Stock 90,000 Retained Earnings 5,000 Dividends 5,200 Sales 923,900 Sales Returns & Allowances 4,000 Sales Discounts 9,000 Cost of Goods Sold 375,000 Bad Debts Expense Depreciation Expense Wages Expense 260,000 Rent Expense 65,000 Insurance Expense 16,000 Supplies Expense 7,000 Interest Revenue 800 Interest Expense 9,000 Gain on Sale of Equipment 5,000 Income Tax Expense 4,000 Total $1,346,403 $1,346,403 Information for the necessary adjustments or calculations as of December 31, 2014: 1. The company last received interest on the note receivable on October 30, 2014. Interest will next be paid on April 30, 2015, when the note matures. Record the accrued interest revenue for the last 2 months of 2014. The annual interest rate is 6%. Round to nearest whole dollar. 2. The Equipment was purchased prior to 2014. The company uses the straight-line method, assumed a $5,000 salvage value and an estimated useful life of 10 years. Record depreciation expense for the full year of 2014. 3. The company uses the allowance method to record its uncollectible accounts. The new Chief Financial Officer (CFO) estimated that 3% of Accounts Receivables at December 31, 2014, will be uncollectible. Record the adjusting entry for bad debt expense for 2014. 4. The company issued 8%, 10-year bonds when the market rate for similar investments is 5%. The company pays interest each year on January 1st. Using the effective interest method of amortizing the premium on bonds payable, accrue the interest expense as of December 31, 2014. Round to nearest whole dollar for your interest expense calculation. 5. Employees were last paid on December 24, 2014. Several employees worked through December 31st and wages due but not yet paid are $5,500. These wages will be paid in early January. An adjusting entry needs to be recorded to reflect this liability at Dec 31, 2014. Instructions: You must turn in the work performed on the sheets printed with this page. Your assignment will NOT BE ACCEPTED ON PLAIN PAPER. 1. Write the journal entries required for each of the 5 events described below on the General page provided. Use ONLY the accounts listed on the trial balance for your journal entries. 2. Post the journal entry transactions to individual T-accounts and prepare an adjusted trial balance for The Cohen Fencing Company as of December 31, 2014. Use the space below for T-accounts (REQUIRED FOR GRADING). For each account in the journal entries, you will need to adjust the balance from the unadjusted trial balance with the debit or credit from the journal entry. (You only need to provide T-accounts for those that change) Part 2: Using the trial balance below for Rochman Water Company (this is a different company and new problem), prepare (1) a Multi-step Income Statement and prepare (2) the Statement of Retained Earnings and (3) Classified Balance Sheet on the pages which follow. To get full credit you must include all critical subtotals. Rochman Water Company Adjusted Trial Balance December 31, 2014 Debit Credit Cash 2,517 Accounts Receivable 1,560 Allowance for Uncollectible Accounts 17 Short term Note Receivable 76 Interest Receivable 2 Supplies 35 Inventory 1,019 Prepaid Expenses 15 Equipment 8,725 Accumulated Depreciation 975 Copyrights 98 Accounts Payable 370 Interest Payable 2 Unearned Revenue 40 Long Term Note Payable 3,400 Common Stock 6,600 Add’l Paid-in-Capital 800 Retained Earnings (1/1/12) 2,000 Dividends 100 Sales 34,900 Sales Returns & Allowances 34 Sales Discounts 65 Cost of Goods Sold 30,200 Bad debt expense 34 Depreciation Expense 276 Amortization Expense 11 Wages Expense 2,000 Rent Expense 500 Office Expense 79 Supplies Expense 100 Selling Expense 816 Interest Expense 100 Interest Revenue 8 Income Tax Expense 750 Totals $49,112 $49,112 (Tips: see the illustration 5-11 on Page 245 in your textbook) (Tips: look at the presentation of illustration 2-2 on Page 49 in your textbook) Part 3: Long - term liabilities 1. Green Glove Corporation issued $600,000, 9%, 20-yr bonds on Jan 1, 2014, for $___________at 8%. PV of 600,000 x __________=______________ PV of interest payment (600,000 x ___ %) ______ x __________=______________ This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Green Glove uses the effective-interest method to amortize bond premium or discount. Prepare the journal entries for: 1. The issuance of the bonds on Jan 1, 2014. 2. The accrual of interest and the premium amortization on December 31, 2014. 3. The payment of interest on January 1, 2015. 2. Ankle Construction takes out a loan of $550,000 for a building on December 31, 2013. The mortgage payable terms are 8.2%. The terms provide for semiannual installment payments of $30,275 on June 30 and December 31. Prepare the journal entries to record the mortgage loan and the first two installment payments. Part 4: Stockholder’s Equity 1) The following items were shown on the balance sheet of Martin Corporation on December 31, 2014: Stockholders’ Equity Paid-In Capital Capital Stock Common stock, $5 par value, 750,000 shares authorized; ______ shares issued and ______ outstanding 3,000,000 Additional paid-in capital In excess of par value 180,000 Total paid in capital 3,180,000 Retained Earnings 500,000 Total paid-in capital and retained earnings 3,680,000 Less: Treasury stock (20,000 shares) 280,000 Total stockholders’ equity $3,400,000 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) How much did the treasury stock cost per share? $____________ (e) What was the average issue price of the common stock? $____________ 2) On January 1, 2014, Browning Corporation had 75,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued 90,000 shares of common stock for $675,000 June 1 Declared a cash dividend of $2.00 per share to stockholders of record on June 15 June 15 Determine which shareholders are eligible to receive a dividend June 30 Paid the $2.00 cash dividend Dec. 1 Purchased 5,000 shares of common stock for the treasury for $18 per share Instructions Prepare journal entries to record the above transactions. If no entry is required for a particular transaction, write down "No journal entry required". Part 5: Statement of Cash Flows 1) Fill in the table: Indicate if it is an increasing or decreasing transaction with a plus or minus sign. Indicate if it is operating (O), financing (F) or investing activity (I). +/- O, F, I Cash collection of accounts receivable 340,000 Cash collection of interest revenue 12,500 Cash collection of dividend revenue 10,500 Cash proceeds from sale of equipment 12,000 Cash proceeds from sale of common stock 52,000 Cash payment of dividends 2,500 Cash payment for inventory 120,630 Cash payment for expenses 61,650 Cash payment for wages 45,250 Cash payment for interest expense 925 Cash payment for purchase of equipment 25,250 Cash payment for repayment of debt 15,000 2) Use the information in the table above, prepare a Statement of Cash Flows using the direct method (list the transaction and the amount under each section. Be sure to indicate if it is increasing or decreasing (+ or -).). 3) Calculate the Current Cash Debt Coverage Ratio and the Cash Debt Coverage Ratio for this company using the Statement of Cash Flows prepared above. Additional information: the beginning balance of current liabilities is $70,000 and the ending balance of current liabilities is $67,000; the beginning balance of total liabilities is $520,000 and the ending balance of total liabilities is $620,000.
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