Accounting

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ACCT_621 UCW_Spring_2020 Assignment_1 (ch.1,2,3,5,6,7,8,9)

Instructions

 The title page is a requirement

 You are supposed to answer the questions on your own

 Submit only the solution to the question. Do not copy-paste the questions

in your submission

 Any reference to any kind of open sources will trigger the academic

consequences

 For all questions show all your calculation, starting with the formula,

then – calculation, then - solution

 In calculations the signs as $, %, etc. should accompany the figures, e.g.

$40, 15%, 3.5 times

 Neither, Excel skills, nor writing style will be awarded any marks

 Make sure that the tables fit into the pages

 Start answering each question from the new page. Only ONE ANSWER for

ONE PAGE

 Do NOT use multiple colour or highlighting

 No bonus marks for the early submission

 Design your submission using the APA or CHICAGO style

READ THE QUESTION CAREFULLY AND

ANSWER WHAT IS ASKED

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Question 1 {17 marks}

The following items are taken from the financial statements of Maroon Company for

2020:

Accounts payable $ 10,000 Accounts receivable 11,000 Accumulated depreciation—equipment 38,000 Advertising expense 21,000 Cash 14,000 Common stock 90,000 Depreciation expense 12,000 Dividends 15,000 Equipment 210,000 Insurance expense 3,000 Notes payable (due 2023) 70,000 Prepaid insurance 6,000 Rent expense 17,000 Retained earnings (beginning) 12,000 Salaries and wages expense 34,000 Salaries and wages payable 3,000 Service revenue 130,000 Supplies 4,000 Supplies expense 6,000

Required

a) Prepare in good form an Income statement

b) Prepare in good form a Statement of retained earnings

c) Prepare a Classified balance sheet for Maroon Company at December 31, 2020, assuming the note payable is a long-term liability

d) Compute the current ratio, debt to assets ratio, and earnings per share value.

The average number of shares outstanding for 2020 was 10,000

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Question 2 {14 marks}

A tabular analysis of the transactions, made during March 2020 by a Company

during its first month of operation, is shown below:

Assets = Liability + Shareholders' Equity

?

? ? ? ? ? ? ? ? ? ?

1. $30,000 $30,000

2. (1,000) $5,000 $4,000

3. (750) $750

4. 2,400 $5,900 8,300

5. (1,500) (1,500)

6. (1,000) (1,000)

7. (800) (800)

8. 450 (450)

9. (4,000) (4,000)

10. 500 (500)

Required

(a) In the columns of the table: name the accounts

(b) In a sentence: indicate each increase and decrease in accounts and explain

them

(c) Determine by how much shareholders' equity increased or decreased for

the month

(d) Prepare in good form an Income statement for the month

Show all your computations

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Question 3 {12 marks}

The Circus Company's bank statement for the month of April showed a balance per

bank of $7,000. The company's Cash account in the accounting records had a

balance of $5,659 at April 30. Other information is as follows:

 Cash receipts for April 30 recorded on the company's books were $6,000 but this

amount does not appear on the bank statement.

 The bank statement shows a debit memorandum for $40 for check printing charges.

 Check No. 119 payable to AirBorn Company was recorded in the cash payments

record and cleared the bank for $248. A review of the accounts payable record shows

a $36 balance in the account of AirBorn Company and that the payment to them

should have been for $284.

 The total amount of checks still outstanding at April 30 amounted to $5,800.

 Check No. 138 was correctly written and paid by the bank for $409. The recording

shown a decrease to Accounts Payable and a decrease to Cash in Bank for $490.

 The bank returned an NSF check from a customer for $560.

 The bank included a credit memorandum for $2,060 which represents collection of a

customer's note by the bank for the company; principal amount of the note was

$2,000 and interest was $60. Interest has not been accrued.

Required

Prepare a bank reconciliation statement in good form for the Circus Company at

April 30. Show all your calculation

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Question 4 {18 marks}

Company had a $300 balance in the Allowance for Doubtful Accounts account at

December 31, 2020, before the current year's adjustment for uncollectible accounts. An aging of the accounts receivable revealed the following:

Estimated Percentage Uncollectible Current Accounts $170,000 1% 1–30 days past due 15,000 3% 31–60 days past due 12,000 6% 61–90 days past due 5,000 15% Over 90 days past due 9,000 30% Total Accounts Receivable $211,000

Required

a) Calculate the estimated total uncollectable amount

b) Using a tabular summary, enter the unadjusted balances in the “Accounts Receivable” and “Allowance for Doubtful Accounts” accounts

c) Record “Bad Debt Expense” balance at December 31, 2020.

Show all your calculation

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Question 5 {12 marks}

Required

A tractor that cost $36,000 and on which $26,500 of depreciation had been recorded, was disposed of for $10,200.

a. Indicate whether a gain or loss should be recorded, and for what amount.

Assume that the tractor of Part (a), above, was instead discarded.

b. Indicate whether a gain or loss should be recorded, and for what amount.

Assume that the tractor of Part (a), above, was instead sold for $9,400.

c. Indicate whether a gain or loss should be recorded, and for what amount.

Show all your calculation

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Question 6 {17 marks}

The following stockholders' equity accounts, arranged alphabetically, are in the records of Marvel Corporation at December 31, 2020. Common shares ($5 book value) $2,800,000 Contributed Capital in Excess of Par Value—Preferred shares 45,000 Contributed Capital in Excess of Book Value—Common shares 1,050,000 Preferred shares, 8%, $100 par, non-cumulative) 1,000,000 Retained Earnings 1,684,000 Treasury Shares (10,000 shares) 98,000

Required

Prepare the shareholders’ equity section of the balance sheet at December 31, 2020.

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Question 7 {10 marks}

The financial statements of the Precious Company appear below:

PRECIOUS COMPANY Comparative Balance Sheet

December 31, _________________________________________________________________________

Assets 2020 2019 Cash ............................................................................................. $ 25,000 $ 40,000 Debt investments .......................................................................... 20,000 60,000 Accounts receivable (net) .............................................................. 50,000 30,000 Inventory ....................................................................................... 140,000 170,000 Property, plant and equipment (net) .............................................. 170,000 200,000 Total assets ............................................................................. $405,000 $500,000

Liabilities and stockholders' equity Accounts payable .......................................................................... $ 25,000 $ 30,000 Short-term notes payable .............................................................. 40,000 90,000 Bonds payable .............................................................................. 75,000 160,000 Common shares ............................................................................ 160,000 145,000 Retained earnings ......................................................................... 105,000 75,000 Total liabilities and shareholders' equity ................................... $405,000 $500,000

PRECIOUS COMPANY Income Statement

For the Year Ended December 31, 2020

Net sales (all on credit) ................................................................. $360,000 Cost of goods sold ........................................................................ 184,000 Gross profit ................................................................................... 176,000 Expenses Interest expense ...................................................................... $11,000 Selling expenses ..................................................................... 30,000 Administrative expenses .......................................................... 20,000 Total expenses .................................................................. 61,000 Income before income taxes ......................................................... 115,000 Income tax expense ...................................................................... 35,000 Net income .................................................................................... $ 80,000 Additional information: a. Cash dividends of $50,000 were declared and paid on common stock in 2020.

b. Weighted-average number of shares of common stock outstanding during 2020 was 50,000 shares.

c. Market price of common stock on December 31, 2020, was $16 per share.

d. Net cash provided by operating activities for 2020 was $70,000.

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Required

Using the financial statements and additional information above, compute the following ratios for the Precious Company for 2020. Show all formulas and computations.

1. Current ratio _________.

2. Return on common stockholders' equity _________.

3. Price-earnings ratio _________.

4. Inventory turnover _________.

5. Accounts receivable turnover _________.

6. Times interest earned _________.

7. Profit margin _________.

8. Days in inventory _________.

9. Payout ratio _________.

10. Return on assets _________.

The end of the assignment