Q1. Cash is King, Inc. Statement of Cash Flow Worksheet
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December 31
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Difference
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|
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2016
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2015
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ASSETS
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|
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Cash
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$41,000
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$22,000
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$19,000
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Account Receivable, net
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74,000
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67,000
|
7,000
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Inventories
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180,000
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169,000
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11,000
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Prepaid Assets
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1,000
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2,000
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(1,000)
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Land
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71,000
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110,000
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(39,000)
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|
Equipment
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250,000
|
200,000
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50,000
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|
Accumulated Depreciation
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(69,000)
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(42,000)
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(27,000)
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|
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$548,000
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$528,000
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LIABILIRTIES & EQUITY
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|
|
|
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Accounts payable
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$49,000
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$45,000
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$4,000
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Income taxes payable
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4,000
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2,000
|
2,000
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|
Bonds payable
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200,000
|
200,000
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-
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Common stock
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64,000
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54,000
|
10,000
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|
Additional Paid-in-Capital
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101,000
|
93,000
|
8,000
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|
Retained Earnings
|
130,000
|
134,000
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(4,000)
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|
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$548,000
|
$528,000
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|
Additional Information:
1. Net income for 2016 was $25,000.
2. Cash dividends of $29,000 were declared and paid in 2016.
3. Bonds amounting to $100,000 were retired. A new bond offering of $100,000 was issued.
4. No land was purchased in 2016.
5. Equipment (cost - $10,000; accumulated depreciation - $5,000) was sold for $5,000 cash in 2016.
6. New shares of common stock were sold for $18,000 in 2016.
Required: Prepare the statement of cash for the year ended Dec. 31, 2016 using the indirect method.
Q2. On March 1, 2014, the Bogus Company purchased a piece of equipment that cost $42,000, spent $1,500 to ship it to Lake Charles from Keokuk, IO and spent an additional $500 to pour a concrete pad to set it upon. The machine is expected to last 5 years and have a salvage value of $2,000.
Required: a) Prepare the journal entry to reflect depreciation expense for the month of March, 2014 assuming the company uses straight-line depreciation. (Show your work)
b) On August 31, 2016, the company decides that this piece of equipment will actually have a 7 year life instead of 5 and a salvage value of $1,000 instead of $2,000. What journal entry for depreciation expense will they make for the month ended August 31, 2016 to reflect this change of estimate? (Show your work)
Q3. The Fidelity Company has $1,800,000 of sales for March 2016 (30% of which are credit sales and the rest were cash sales). The company's accounts receivable are aged as follows:
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Age
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Accts Rec
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Bad Debt History
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0-30
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$90,000
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0.8% (.008)
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|
30-60
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50,000
|
3%
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60-90
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35,000
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5%
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|
90-120
|
12,000
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10%
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> 120
|
8,000
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15%
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At the beginning of the month, the company had a credit balance of $1,000 in the allowance for doubtful accounts account.
Required:
a. What is the required journal entry if the company uses the aging (balance sheet) approach in estimating bad debts expense?
b. What does the company's balance sheet reflect for accounts receivable (net) if they use the aging method?
c. What is the necessary journal entry to recognize bad debts expense for the month of March 2016 if the company uses the percentage of credit sales approach and historically 1% of all credit sales prove to be subsequently uncollectible?