Prepare a statement of owners equity list items that

Question

Problem 1 - Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sept. 1 Kawabata begins practice as a dentist and invests $21,710 cash.

2 Purchases dental equipment on account from Green Jacket Co. for $17,640.

4 Pays rent for office space, $844 for the month.

4 Employs a receptionist, Michael Bradley.

5 Purchases dental supplies for cash, $963.

8 Receives cash of $1,710 from patients for services performed.

10 Pays miscellaneous office expenses, $480.

14 Bills patients $6,910 for services performed.

18 Pays Green Jacket Co. on account, $4,150.

19 Withdraws $3,460 cash from the business for personal use.

20 Receives $1,080 from patients on account.

25 Bills patients $2,890 for services performed.

30 Pays the following expenses in cash: Salaries and wages $2,550; miscellaneous office expenses $97. (Record each separately.)

30 Dental supplies used during September, $360.

Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value.

Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). (Post entries in the order displayed in the problem statement.)

Prepare a trial balance.

Prepare a statement of owner's equity. (List items that increase owner's equity first.)

Prepare an unclassified balance sheet. (List assets in order of liquidity.)

Prepare an income statement.

Problem 2 - Selected amounts from Trent Company's trial balance of 12/31/14 appear below:

1.	Accounts Payable	$123,920
2.	Accounts Receivable	143,510
3.	Accumulated Depreciation-Equipment	187,950
4.	Allowance for Doubtful Accounts	15,350
5.	Bonds Payable	499,000
6.	Cash	152,860
7.	Common Stock	50,000
8.	Equipment	947,100
9.	Prepaid Insurance	29,150
10.	Interest Expense	10,730
11.	Inventory	300,400
12.	Notes Payable (due 6/1/15)	217,900
13.	Prepaid Rent	212,040
14.	Retained Earnings	839,800
15.	Salaries and Wages Expense	301,900

(All of the above accounts have their standard or normal debit or credit balance.)

(a) Prepare adjusting journal entries at year end, December 31, 2014, based on the following supplemental information.

a. The equipment has a useful life of 15 years with no salvage value. (Straight-line method being used.)               

b. Interest accrued on the bonds payable is $14,970 as of 12/31/14.        

c. Prepaid insurance at 12/31/14 is $22,330.         

d. The rent payment of $212,040 covered the six months from November 30, 2014 through May 31, 2015.           

e. Salaries and wages earned but unpaid at 12/31/14, $22,740.  

Problem 3 - Shown below is an income statement for 2014 that was prepared by a poorly trained bookkeeper of Howell Corporation.

Howell Corporation INCOME STATEMENT December 31, 2014
Sales revenue	$907,500
Investment revenue	17,040
Cost of goods sold	(408,170)
Selling expenses	(143,510
Administrative expenses	(192,500)
Interest expense	(12,360)
Income before special items	168,000
Special items
Loss on disposal of a component of the business	(29,170)
Major casualty loss (extraordinary item)	(49,540)
Net federal income tax liability	(26,787)
Net income	$62,503

Prepare a multiple-step income statement for 2014 for Howell Corporation that is presented in accordance with generally accepted accounting principles (including format and terminology). Howell Corporation has 50,000 shares of common stock outstanding and has a 30% federal income tax rate on all tax related items.

Problem 4 - Presented below is an income statement for Kinder Company for the year ended December 31, 2014.

Kinder Company Income Statement For the Year Ended December 31, 2014
Net sales	$794,050
Costs and expenses:
Cost of goods sold	567,900
Selling, general, and administrative expenses	76,930
Other, net	30,760
Total costs and expenses	675,590
Income before income taxes	118,460
Income taxes	35,538
Net income	$82,922

Additional information:

1. "Selling, general, and administrative expenses" included a usual but infrequent charge of $7,390 due to a loss on the sale of investments.               

2. "Other, net" consisted of interest expense, $11,430, and an extraordinary loss of $19,330 before taxes due to earthquake damage. If the extraordinary loss had not occurred, income taxes for 2014 would have been $41,337 instead of $35,538.              

3. Kinder had 20,000 shares of common stock outstanding during 2014. 

Using the single-step format, prepare a corrected income statement, including the appropriate per share disclosures.

Problem 5 - Selected financial statement information and additional data for Stanislaus Co. is presented below.

	December 31
	2013	2014
Cash	$41,530	$72,290
Accounts Receivable (net)	83,320	140,720
Inventory	168,550	205,120
Land	59,510	18,960
Equipment	506,600	788,530
TOTAL	$859,510	$1,225,620
Accumulated depreciation	$84,000	$114,410
Accounts payable	48,460	85,280
Notes payable - short-term	65,620	29,830
Notes payable - long-term	165,350	295,160
Common stock	415,780	484,450
Retained earnings	80,300	216,490
TOTAL	$859,510	$1,225,620

Additional data for 2014:

1. Net income was $217,730.

2. Depreciation was $30,410.

3. Land was sold at its original cost.

4. Dividends of $81,540 were paid.

5. Equipment was purchased for $83,450 cash.

6. A long-term note for $198,480 was used to pay for an equipment purchase.

7. Common stock was issued to pay a $68,670 long-term note payable.

Problem 6 - Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014.

Goodwill	$ 129,040		Accumulated Depreciation-Equipment	$ 292,172
Payroll Taxes Payable	181,631		Inventory	243,840
Bonds payable	304,040		Rent payable (short-term)	49,040
Discount on bonds payable	15,172		Income taxes payable	102,402
Cash	364,040		Rent payable (long-term)	484,040
Land	484,040		Common stock, $1 par value	204,040
Notes receivable	449,740		Preferred stock, $10 par value	154,040
Notes payable (to banks)	269,040		Prepaid expenses	91,960
Accounts payable	494,040		Equipment	1,474,040
Retained earnings	?		Equity investments (trading)	125,040
Income taxes receivable	101,670		Accumulated Depreciation-Buildings	270,372
Notes payable (long-term)	1,604,040		Buildings	1,644,040

Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Cost and fair value of equity investments (trading) are the same.

Problem 7 - If $80,000 is deposited annually starting on January 1, 2014 and it earns 15%, how much will accumulate by December 31, 2023?

Problem 8 - Bates Company has entered into two lease agreements. In each case the cash equivalent purchase price of the asset acquired is known and you wish to find the interest rate which is applicable to the lease payments.

Calculate the implied interest rate for the lease payments.

Problem 9 - Pine Leasing Company purchased specialized equipment from Wayne Company on December 31, 2013 for $720,000. On the same date, it leased this equipment to Sears Company for 5 years, the useful life of the equipment. The lease payments begin January 1, 2014 and are made every 6 months until July 1, 2018. Pine Leasing wants to earn 10% annually on its investment.

Various Factors at 10%
Periods or Rents	Future Value of $1	Present Value of $1	Future Value of an Ordinary Annuity	Present Value of an Ordinary Annuity
9	2.35795	0.42410	13.57948	5.75902
10	2.59374	0.38554	15.93742	6.14457
11	6.49506	0.35049	18.53117	6.49506

 

Various Factors at 5%
Periods or Rents	Future Value of $1	Present Value of $1	Future Value of an Ordinary Annuity	Present Value of an Ordinary Annuity
9	1.01725	0.64461	11.02656	7.10782
10	1.62889	0.61391	12.57789	7.72173
11	8.30641	0.58468	14.20679	8.30641

Problem 10 - Accounts receivable in the amount of $520,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $590,000. The finance company charged a 2% commission on the face amount of the loan, and the note bears interest at 4% per year.

During the first month, Marsh collected $380,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note.

Make all the entries for Marsh Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company.

Problem 11 - The trial balance before adjustment of Risen Company reports the following balances:

	Dr.	Cr.
Accounts receivable	$100,000
Allowance for doubtful accounts		$1,000
Sales (all on credit)		500,000
Sales returns and allowances	20,000

Problem 12 - On December 31, 2014, Green Company finished consultation services and accepted in exchange a promissory note with a face value of $610,000, a due date of December 31, 2017, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%.

The following interest factors are provided:

	Interest Rate
Table Factors For Three Periods	5%	10%
Future Value of 1	1.15763	1.33100
Present Value of 1	0.86384	0.75132
Future Value of Ordinary Annuity of 1	3.15250	3.31000
Present Value of Ordinary Annuity of 1	2.72325	2.48685

Problem 13 - Prepare journal entries for Mars Co. for:

(a) Accounts receivable in the amount of $1,150,000 were assigned to Utley Finance Co. by Mars as security for a loan of $900,000. Utley charged a 2% commission on the accounts; the interest rate on the note is 11%.

(b) During the first month, Mars collected $300,000 on assigned accounts after deducting $660 of discounts. Mars wrote off a $920 assigned account.

(c) Mars paid to Utley the amount collected plus 3 month's interest on the note.

Problem 14 - Vogts Company sells TVs. The perpetual inventory was stated as $38,500 on the books at December 31, 2014. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows.

1. TVs shipped to a customer January 2, 2015, costing $5,000 were included in inventory at December 31, 2014. The sale was recorded in 2015.

2. TVs costing $12,000 received December 30, 2014, were recorded as received on January 2, 2015.

3. TVs received during 2014 costing $4,600 were recorded twice in the inventory account.

4. TVs shipped to a customer December 28, 2014, f.o.b. shipping point, which cost $9,000, were not received by the customer until January, 2015. The TVs were included in the ending inventory.

5. TVs on hand that cost $6,100 were never recorded on the books.

Compute the correct inventory at December 31, 2014.

Problem 15 - Cruise Industries purchased $10,100 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $2,800 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.

(a) Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

(b) Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

(c) At what amount would the purchase on February 1 be recorded if the net method were used?

Problem 16 - The board of directors of Ichiro Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available.

Sales	21,200	units @	$63
Inventory, January 1	6,480	units @	25
Purchases	6,760	units @	28
	10,400	units @	31
	7,730	units @	38
Inventory, December 31	10,170	units @	?
Operating expenses	$251,800

Prepare a condensed income statement for the year on both bases for comparative purposes.

Problem 17 - Johnny Football Shop began operations on January 2, 2014. The following stock record card for footballs was taken from the records at the end of the year.

Date	Voucher	Terms	Units Received	Unit Invoice Cost	Gross Invoice Amount
1/15	10624	Net 30	59	$30	$1,770
3/15	11437	1/5, net 30	74	24	1,776
6/20	21332	1/10, net 30	99	22	2,178
9/12	27644	1/10, net 30	93	18	1,674
11/24	31269	1/10, net 30	85	16	1,360
	Totals		410		$8,758

A physical inventory on December 31, 2014, reveals that 103 footballs were in stock. The bookkeeper informs you that all the discounts were taken. Assume that Johnny Football Shop uses the invoice price less discount for recording purchases.

Compute the December 31, 2014, inventory using the FIFO method.

What method would you recommend to the owner to minimize income taxes in 2014, using the inventory information for footballs as a guide?

Problem 18 - Presented below is information related to Dino Radja Company.

Date	Ending Inventory (End-of-Year Prices)	Price Index
December 31, 2011	$ 60,400	100
December 31, 2012	178,948	154
December 31, 2013	179,872	176
December 31, 2014	206,910	190
December 31, 2015	245,795	205
December 31, 2016	284,504	212

Compute the ending inventory for Dino Radja Company for 2011 through 2016 using the dollar-value LIFO method.

Problem 19 - Flint Department Store wishes to use the retail LIFO method of valuing inventories for 2015. The appropriate data are as follows:

	At Cost	At Retail
December 31, 2014 inventory (base layer)	$1,250,000	$2,100,000
Purchases (net of returns, allowances, markups, and markdowns)	2,100,000	3,500,000
Sales revenue		3,290,000
Price index for 2015		105

Complete the following schedule. (Do not leave any answer field blank. Enter 0 for amounts.)

Problem 20 - Presented below is information related to Rembrandt Inc.'s inventory.

(per unit)	Skis	Boots	Parkas
Historical cost	$278.16	$155.18	$77.59
Selling price	310.37	212.28	107.97
Cost to distribute	27.82	11.71	3.66
Current replacement cost	297.19	153.72	74.66
Normal profit margin	46.85	42.46	31.11

Determine the following:

(a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis.

Problem 21 - Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $233,570 at both cost and market value. At December 31, 2014, the inventory was $293,740 at cost and $260,650 at market value.

Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method.

Problem 22 - Bell, Inc. buys 1,200 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $9,300. Bell will group the CDs into three price categories for resale, as indicated below

Group	No. of CDs	Price per CD
1	200	$6
2	800	12
3	200	18

Determine the cost per CD for each group, using the relative sales value method.

Problem 23 - Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,383,200. At December 31, 2014, the raw materials to be purchased have a market value of $978,900. Prepare any necessary December 31, 2014 entry.

Problem 24 - Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,108,900. At December 31, 2014, the raw materials to be purchased have a market value of $979,700. In 2015, Kemper paid $1,108,900 to obtain the raw materials which were worth $979,700. Prepare the entry to record the purchase.

Problem 25 - Fosbre Corporation's April 30 inventory was destroyed by fire. January 1 inventory was $250,700, and purchases for January through April totaled $512,900. Sales revenue for the same period were $715,800. Fosbre's normal gross profit percentage is 35% on sales.

Using the gross profit method, estimate Fosbre's April 30 inventory that was destroyed by fire.

Problem 26 - In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and $1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net sales of $14,549 million.

(a) Compute Gap's inventory turnover for the fiscal year 2012.

(b) Compute Gap's average days to sell inventory for the fiscal year 2012.

Problem 27 - Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.

Abstract company's fee for title search		$1,076
Architect's fees		6,562
Cash paid for land and dilapidated building thereon		180,090
Removal of old building	$41,400
Less: Salvage	11,385	30,015
Interest on short-term loans during construction		15,318
Excavation before construction for basement		39,330
Machinery purchased (subject to 2% cash discount, which was not taken). Company uses net method to record discount.		113,850
Freight on machinery purchased		2,774
Storage charges on machinery, necessitated by noncompletion of
building when machinery was delivered		4,513
New building constructed (building construction took 6 months from
date of purchase of land and old building)		1,003,950
Assessment by city for drainage project		3,312
Hauling charges for delivery of machinery from storage to new building		1,283
Installation of machinery		4,140
Trees, shrubs, and other landscaping after completion of building (permanent in nature)		11,178

Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation.

Problem 28 - Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of $16,600. Presented below are three independent cases related to the equipment.

(a) Geddes paid cash for the equipment 8 days after the purchase. The vendor's credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross.

(b) Geddes traded in equipment with a book value of $2,300 (initial cost $8,500), and paid $13,530 in cash one month after the purchase. The old equipment could have been sold for $420 at the date of trade. (The exchange has commercial substance.)

(c) Geddes gave the vendor a $17,270 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 9%.

Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above.

Problem 29 - Laserwords Inc. is a book distributor that had been operating in its original facility since 1987. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Laserwords since 2009. Laserwords' original facility became obsolete by early 2014 because of the increased sales volume and the fact that Laserwords now carries CDs in addition to books.

On June 1, 2014, Laserwords contracted with Black Construction to have a new building constructed for $8,716,000 on land owned by Laserwords. The payments made by Laserwords to Black Construction are shown in the schedule below.

Date	Amount
July 30, 2014	$1,961,100
January 30, 2015	3,268,500
May 30, 2015	3,486,400
Total payments	$8,716,000

Construction was completed and the building was ready for occupancy on May 27, 2015. Laserwords had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2015, the end of its fiscal year.

10%, 5-year note payable of $4,358,000, dated April 1, 2011, with interest payable annually on April 1.

12%, 10-year bond issue of $6,537,000 sold at par on June 30, 2007, with interest payable annually on June 30.

The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material.

Some interest cost of Laserwords Inc. is capitalized for the year ended May 31, 2015. Compute the amount of each items that must be disclosed in Laserwords' financial statements.

Problem 30 - The following transactions occurred during 2014. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Jan. 30 A building that cost $438,240 in 1997 is torn down to make room for a new building. The wrecking contractor was paid $16,932 and was permitted to keep all materials salvaged.

Mar. 10 Machinery that was purchased in 2007 for $53,120 is sold for $9,628 cash, f.o.b. purchaser's plant. Freight of $996 is paid on the sale of this machinery.

Mar. 20 A gear breaks on a machine that cost $29,880 in 2009. The gear is replaced at a cost of $6,640. The replacement does not extend the useful life of the machine but does make the machine more efficient.

May 18                 A special base installed for a machine in 2008 when the machine was purchased has to be replaced at a cost of $18,260 because of defective workmanship on the original base. The cost of the machinery was $47,144 in 2008. The cost of the base was $11,620, and this amount was charged to the Machinery account in 2008.

June 23 One of the buildings is repainted at a cost of $22,908. It had not been painted since it was constructed in 2010.

Prepare general journal entries for the transactions.

Problem 31 - Ottawa Corporation owns machinery that cost $35,760 when purchased on July 1, 2011. Depreciation has been recorded at a rate of $4,291 per year, resulting in a balance in accumulated depreciation of $15,019 at December 31, 2014. The machinery is sold on September 1, 2015, for $9,298.

Prepare journal entries to (a) update depreciation for 2015 and (b) record the sale.

Problem 32 - A machine which cost $300,000 is acquired on October 1, 2014. Its estimated salvage value is $30,000 and its expected life is eight years.

(a) Calculate depreciation expense for 2014 and 2015 by Double-declining balance.

(b) Calculate depreciation expense for 2014 and 2015 by Sum-of-the-years'-digits.

(c) At the end of 2015, which method results in the larger accumulated depreciation amount?

Problem 33 - Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May.

Price	$93,500
Credit terms	2/10, n/30
Freight-in	$ 880
Preparation and installation costs	$ 4,180
Labor costs during regular production operations	$11,550

It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,650. The invoice for Machine #201 was paid May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements.

Problem 34 - Dickinson Inc. owns the following assets.

Asset	Cost	Salvage	Estimated Useful Life
A	$78,500	$7,850	10 years
B	55,700	5,570	5 years
C	140,220	6,840	12 years

Compute the composite depreciation rate and the composite life of Dickinson's assets.

Problem 35 - Presented below is information related to equipment owned by Suarez Company at December 31, 2014.

Cost	$ 21,843,000
Accumulated depreciation to date	2,427,000
Expected future net cash flows	16,989,000
Fair value	11,649,600

Assume that Suarez will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 5 years.

a. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014.

Prepare the journal entry to record depreciation expense for 2015.

The fair value of the equipment at December 31, 2015, is $12,377,700. Prepare the journal entry (if any) necessary to record this increase in fair value.

Problem 36 - Stanislaw Timber Company owns 9,000 acres of timberland purchased in 2003 at a cost of $3,276 per acre. At the time of purchase, the land without the timber was valued at $936 per acre. In 2004, Stanislaw built fire lanes and roads, with a life of 30 years, at a cost of $196,560. Every year, Stanislaw sprays to prevent disease at a cost of $7,020 per year and spends $16,380 to maintain the fire lanes and roads. During 2005, Stanislaw selectively logged and sold 1,638,000 board feet of timber, of the estimated 8,190,000 board feet. In 2006, Stanislaw planted new seedlings to replace the trees cut at a cost of $234,000.

Problem 37 - The 2011 Annual Report of Tootsie Roll Industries contains the following information.

(in millions)	December 31, 2011	December 31, 2010
Total assets	$857.9	$858.0
Total liabilities	191.9	190.6
Net sales	528.4	517.1
Net income	43.9	53.0

Compute the following ratios for Tootsie Roll for 2011.