Project Description -
General Products Inc is incorporated in Nevada, USA on Jan 1, 2013 to takeover a local retail chain. The objective of the company is to supply goods of everyday use to customer's at the most competitive prices. General Products has chain of stores throughout USA. The retail operations of the company are so designed that customers can shop seamlessly in stores and online.
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Balance Sheet of General Products Inc. on Dec 31, 2015
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Assets
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$
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Current Assets
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Cash and cash equivalent
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11,980
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Accounts Receivables
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20,520
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Inventory
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317,060
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Inventory of Premiums ( @$1.10 per premium)
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660
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Total Current Assets
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350,220
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Long Term Assets
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Investments
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66,775
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Property Plant and Equipment
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750,000
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Less Accumulated Depreciation
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90,000
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660,000
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Total Long Term Assets
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726,775
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Intangible Assets
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Trade Marks
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190,000
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Total Assets
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1,266,995
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Liabilities and Shareholders' Equity
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Current Liabilities
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Accounts Payable
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50,722
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Liability for Premiums and Coupons
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550
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5% Short Term Notes Payable due on March 31,2016
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8,000
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Accrued Interest on 6% Bonds Payable
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3,000
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Total Current Liabilities
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62,272
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6% Bonds Payable due 2020
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100,000
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Unamortized Discount on Bonds Payable
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6,732
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93,268
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Total Liabilities
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155,540
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Stockholder's Equity
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Common Stock
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125,000 shares, par value $1 authorized
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100,000 shares issued and outstanding
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130,000
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Paid inCapital in Excess of Par
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946,000
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Retained Earnings
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35,455
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Total nStockholders' Equity
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1,111,455
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Total Liabilities and Stockholders' Equity
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1,266,995
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General Products provides us financial and business related data for 2016 below.
1. Trades Marks were acquired for $200,000 in 2015.Estimated useful at the time of acquisition was 20years. There was a litiagation brought out by a competitor against the Trade Mark. General Product could successfully defended this litigation at a cost of $ 45,000. New useful life of Trade Mark is estimated to be 25 years from the date of acquisition.
2. All sales are on credit and totalled $ 940,560. COGS are $780,650.
3. Included in the total sales of $940,560 are the sales of General Products brand 6000 soap powder boxes GeneralProducts includes one coupon in every soap powder box. Customers can redeem 4 coupons for one Kitchen untensil. Based on past experience 60% of the coupons are redeemed by customers. During 2016 3,400 coupons were redeemed. Purchase of premiums during 2016 totalled 1,000 premiums @ $1.10 each on credit.
4. 6% Bonds Payable are issued on Jan 1 2015 to yield 8% interest. Interest is paid semiannualy on Jan 1st and June 30th. General Products can redeem these Bonds any time after June 30,2016 @ 101.
5. To take advantage of lower interst rates and to finance the redemption of 6% Bonds, on Sept.1st 2016, GeneralProducts issued 5%Bonds in the face value of $100,000 to yield 6%. The maturity period of these 5% Bonds is 10 years and interest is paid semiannually on 1st Jan and 30th June.
The proceeds from the issue of 5% Bonds are used to redeem 6% Bonds Payable @ 101 on Sept.1st 2016.
6. Selling Administrative Expenses excluding depreciation are $87,345. PP&E is depreciated on Striaght Line Method over 25 years of life.
7. Cash collected from customers totalled $906,450.
8. Cash paid to suppliers for credit purchases totalled $728,254
9. Purcahses of inventory totalled $ 689,525.All purchases are on credit.
10. General Products purchased Land for $30,000 for construction of building
Requirements -
1. Record the necessary journal entries for 2016.
2. Prepare Income Statement and Retained Earnings Statement for the year 2016
3. Prepare Balance Sheet on December 31,2016
4. Show full work of all the financial items reported in Income Statement and Balance Sheet.
Please round your calculations closest to $. Ignore tax.
Read the scenario and the requirements -
Scenario -
Global Inc. is a power management company and has been planning to diversify its operations into construction contracts.
On April 1, 2013 Global Inc. began operations of its construction division and entered into contracts for two separate projects.
Project A with a contract price was $1,200,000 started on April 1, 2013 and expected to be completed by March 31, 2015.
Project A provided for penalties of $20,000 per week for late completion. Although during 2014 project A had been on schedule for timely completion, it was completed two weeks late in April 2015.
Second project is project B started on April 1, 2013 and expected to be completed by March 31, 2016. Though the original contract price of project B was $1,600,000, change orders during 2015 added $20,000 to the original contract price.
The following data pertains to the separate long-term construction projects in progress.
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Project A
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Project B
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As of Dec 31,2014
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Costs incurred to date
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$640,000
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$720,000
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Estimated Cost to complete
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160,000
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900,000
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Billings
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680,000
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880,000
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Cash Collections
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550,000
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730,000
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Project A
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Project B
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As of Dec. 31 2015
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Costs incurred to date
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900,000
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1,440,000
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Estimated costs to complete
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-
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360,000
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Billings
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1,120,000
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1,420,000
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Cash Collections
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1,120,000
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1,250,000
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Global Inc. accounts for its long-term construction contracts using the percentage of completion method for financial reporting purposes and the completed contract method for income tax purposes.
Enacted tax rates are 25% for 2014 and 30% for 2015 and 2016.
Global Inc.'s revenue and expenses for Power Management division for the year 2015 are given below:
Revenues - $1,500,000
Selling and Administrative Expenses - 495,000
Depreciation on Plant and Equipment - 345,000
charged on straight line method every year
Global Inc.offers a defined contribution plan to its employees.
Plan Benefit Obligation balance on 1/1/2015 was $230,00, Fair Value of Plan Assets on 1/1/15 was $230,000
The settlement rate is 10% and expected rate of return is 6%
Service cost for 2015 was $43,500
Amortization of prior service cost was $16,500
Actual return on plan assets is $12,400
Selling and Administrative expenses shown above do not include pension expenses.
Deprecaition deducted on income tax return for Power Management division is $395,000 per year for 2014 and 2015
Requirements -
A. Prepare a schedule showing Global Inc construction division balances in the following accounts at De 31, 2014
1. Accounts Receivable
2. Inventory/Current Liability for Project A
3. Inventory/Current Liability for Project B
B. Prepare a schedule showing Global Inc. Gross Profit (Loss) recognized on construction contracts for the years ended Dec. 31, 2014and 2015, under the percentage completion method.
C. Compute deferred taxes for 2014 and 2015 and record Income Tax entry for 2015.
D. Prepare Global Inc. Income Statement for the year 2015.
Attachment:- Assignment Files.rar