Accounting HW Help - 4 Part - Record of Transaction may be journal entry with balance statement, income statement and statement of cash flows

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Presented below are an organization’s (Company-A) opening financial position and a series of transactions that take place over a year. You should determine the appropriate manner in which to record these transactions and then produce three financial statements for the organization at the end of the year. All of the balance sheet items from December 31, 2012, are shown below along with the events that occurred during 2013. Please ignore all taxes (income and sales) in preparing your answer. 

 

Presented below are an organization’s (Company-A) opening financial position and a series of transactions that take place over a year. You should determine the appropriate manner in which to record these transactions and then produce three financial statements for the organization at the end of the year.

 

COMPANY-A offers its clients security systems and alarm monitoring services on a retail basis. COMPANY-A specializes in offering the most up-to-date services with the most technologically advanced equipment. For example, the high-end alarm system, called DAS59, is widely recognized as an industry leader. All of the balance sheet items from December 31, 2012, are shown below along with the events that occurred during 2013. Please ignore all taxes (income and sales) in preparing your answer.

 

Part 1: Opening Balances

 

Company-A, Inc. Balance Sheet Items

As of December 31, 2012

Accounts payable $380,000

Accounts receivable $611,000

Accumulated depreciation $1,245,000

Cash $267,000

Common shares $1,152,000

Short-term bank loan $125,000

Plant, property, and equipment $2,111,000

Interest payable $37,000

Inventory $850,000

Licenses (net) $180,000

Long-term bank loan $525,000

Goodwill $80,000

Retained earnings $304,000

Advances from customers $340,000

Salaries payable $180,000

Short-term investments (trading securities) $180,000

Office supplies $9,000

 

The following events occurred during 2013:

(Part 2: Transactions A-N)

 

A. New credit sales for the year were $1,910,000.

B. New cash sales for the year were $333,000.

C. COMPANY-A acquired office supplies on credit for $32,000.

D. Cash collections from credit sales were $1,720,000.

E. Cash payments for items purchased on credit during the year were $344,000.

F. Paid $363,000 for administrative expenses during the year.

G. COMPANY-A acquired $212,000 of inventory on credit.

H. At the end of the year, COMPANY-A owed the bank $19,000 in interest.

I. COMPANY-A collected $327,000 of cash advances from customers.

J. COMPANY-A offers a “satisfaction guarantee” to its clients for security services. If clients are unhappy with the services they purchased, they are eligible for free additional security services (i.e., this is a form of “after sales warranty” service). The company estimates that future expenditures of approximately $67,000 will be required to perform these “after sales warranty” activities to keep clients satisfied for services originally rendered to clients in 2013.

K. COMPANY-A spent $125,000 during 2013 on research and development activities related to new services the company could offer clients. It is expected that some of these products would be marketable within one or two years, but nobody is sure which products will be successful.

L. On the last day of business in 2013, COMPANY-A declared an $80,000 dividend, which will be paid sometime in the next year.

M. At the end of the year, COMPANY-A owed its employees a total of $66,000 in wages.

N. COMPANY-A paid down the long-term loan by $140,000.

 

(Part 3: Transactions O-Z)

 

O. Sales of $272,000 were earned from prior period cash advances from customers.

P. At the end of the year, the market value of the short-term investments was $157,000.

Q. A total of $3,000 in office supplies remained on hand at the end of the year.

R. COMPANY-A’s policy is to write off all intangible assets over 3 years using straight-line amortization. 2013 is the second year for amortizing licenses.

S. At the end of the year, it was determined that $513,000 of inventory remained on-hand.

T. At the end of the year, it was determined that the carrying value of goodwill had declined by $28,000.

U. Old equipment, which had originally cost $147,000 and was fully depreciated, was scrapped on the first day of business of the year.

V. COMPANY-A acquired all of the assets and liabilities of Smith Alarms, LLC for $555,000 cash. The assets included equipment valued at $425,000 (this equipment was carried on the books of Smith Alarms, LLC at $300,000 net), accounts receivable of $230,000, accounts payable of $250,000, and a demand loan of $52,000. There were no intangible assets.

W. COMPANY-A paid salaries to employees of $390,000 in cash.

X. Paid the bank $58,000 cash towards interest payments during the year.

Y. Depreciation on plant, property, and equipment for 2013 was determined to be $123,000.

Z. At the end of the year, the accountant estimated that $22,000 of accounts receivable owed to the firm would not likely be collected.

 

Part 4: Financial Statements

Create the three financial statements on an Excel spreadsheet. Use standard financial statement heading and formatting conventions.

  • A Balance Sheet for Company-A as of December 31, 2013.
  • An Income Statement for Company-A for the year ending December 31, 2013.
  • A Statement of Cash Flows for Company-A for the year ending December 31, 2013

 

Sample Transaction Recording – Classification needed of opening balances.

 

Company-A.

Balance Sheet Items

As of December 31, 2012

 

 

Transaction

 

 

Amount

Asset, ContraAsset, Liability, Stockholders’ Equity

 

Debit (Left)

Credit (Right)

Accounts payable

$380,000

 

 

Accounts receivable

$611,000

 

 

Accumulated depreciation

$1,245,000

 

 

Cash

$267,000

 

 

Common shares

$1,152,000

 

 

Short-term bank loan

$125,000

 

 

Plant, property, and equipment

$2,111,000

 

 

Interest payable

$37,000

 

 

Inventory

$850,000

 

 

Licenses (net)

$180,000

 

 

Long-term bank loan

$525,000

 

 

Goodwill

$80,000

 

 

Retained earnings

$304,000

 

 

Advances from customers

$340,000

 

 

Salaries payable

$180,000

 

 

Short-term investments (trading securities)

$180,000

 

 

Office supplies

$9,000

 

 

 

In addition to the A-Z transactions, other events were posted to the General Ledger.

Use the General Ledger's ending balances (shown below in alphabetical order) to

prepare the company's Income Statement and Balance Sheet for fiscal year 2014.

 

Company-A, Inc.

Trial Balance

December 31, 2014

Accounts Payable 555,000

Accounts receivable (net) 1,125,000

Accum.Depreciation 1,273,000

Administrative Expenses 380,000

Advances from Customers 450,000

Bad Debt Expense 27,000

Cash 695,000

Common Stock 1,291,000

Cost of Goods Sold 600,000

Decline in ST Investments 25,000

Demand Loan Payable 225,000

Depreciation Expense 145,000

Dividends Payable 80,000

Dividends, declared 100,000

Equipment & Buildings 2,533,000

Goodwill (net) 325,000

Goodwill Impairment 30,000

Interest Expense 50,000

Interest Payable 33,000

Inventory 535,000

Licenses (net) 140,000

Licenses, Amortization 110,000

Long-term Loan Payable 415,000

Research & Development Expense 140,000

Retained Earnings, Beg.Balance 304,000

Salaries Expense 325,000

Salaries Payable 97,000

Sales Revenue 2,750,000

Short-term Investments (net) 164,000

Supplies 6,000

Supplies Expense 43,000

Warranties Expense 75,000

Warranty Payable 100,000

 

 

Statement of Cash Flows

The following information was obtained from the company's General Ledger's Cash account. Use these events to create a Statement of Cash Flows for the current fiscal year.

NOTE: The cash amounts in this listing are NOT meant to correlate to the Income Statement or various non-Cash accounts on the Balance Sheet!

 

267,000         Cash,  beginning balance

695,000         Cash,  ending            balance

 

Cash Generated/Used by the company:

 

a

500,000

 Accounts Payable

b

1,825,000

 Accounts Receivable collections

c

400,000

 Administrative Expenses

d

600,000

 Buying a competitor’s business

e

375,000

 Customer Advances

f

25,000

 Dividends to Investors

g

15,000

 Furniture & Equipment purchases

h

60,000

 Interest Expense

i

3,000

 Interest Revenue

j

100,000

 Issued additional shares of CommonStock

k

150,000

 Research and Development

l

475,000

 Salaries and Wages

m

350,000

 Sales Revenue

 

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