Reference no: EM131733672
Problem 1 - Journalizing stock issuance and cash dividends and preparing the stockholders' equity section of the balance sheet
C-C ell Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes C-Cell to issue 50,000 shares of 7%, $50 par value cumulative preferred stock and 120,000 shares of $2 par value common stock. During the first month, C-Cell completed the following transactions:
Oct. 2 - Issued 22,000 shares of common stock for a building with a market value of $120,000.
Oct. 6 - Issued 900 shares of preferred stock for $70 per share.
Oct. 9 - Issued 12,000 shares of common stock for cash of $60,000.
Oct. 10 - Declared a $16,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock.
Oct. 25 - Paid the cash dividend.
Requirements
1. Record the transactions in the general journal.
2. Prepare the stockholders' equity section of C-Cell's balance sheet at October 31, 2016. Assume C-Cell's net income for the month was $96,000.
Problem 2 - Accounting for long-term notes payable transactions
Consider the following note payable transactions of Caldwell Video Productions.
2016
Apr. 1 Purchased equipment costing $56,000 by issuing a seven-year, 13% note payable. The note requires annual principal payments of $8,000 plus interest each April 1.
Dec. 31 Accrued interest on the note payable.
2017
Apr. 1 Paid the first installment on the note.
Dec. 31 Accrued interest on the note payable.
Requirements -
1. Journalize the transactions for the company.
2. Considering the given transactions only, what are Caldwell Video Productions' total liabilities on December 31, 2017?
Problem 3 - Reporting liabilities
At December 31, MediAssist Precision Instruments owes $51,000 on Accounts Payable, Salaries Payable of $12,000, and Income Tax Payable of $10,000. MediAssist also has $280,000 of Bonds Payable that were issued at face value that require payment of a $50,000 installment next year and the remainder in later years. The bonds payable require an annual interest payment of $5,000, and MediAssist still owes this interest for the current year. Report MediAssist's liabilities on its classified balance sheet.
Problem 4 - Classifying and accounting for stock investments
1. Dec. 31 Fair Value Adjustment-Trading CR $1,100
Hartford Today Publishers completed the following trading investment transactions during 2016 and 2017:
2016
Dec. 6 Purchased 1,100 shares of Golden stock at a price of $22.00 per share, intending to sell the investment next month.
23 Received a cash dividend of 11.10 per share on the Golden stock.
31 Adjusted the investment to its market value of $21.00 per share.
2017
Jan. 27 Sold the Golden stock for $21.60 per share.
Requirements -
1. Journalize Hartford Today's investment transactions. Explanations are not required.
2. On December 31, 2016, how would the Golden stock be classified and at what value would it be reported on the balance sheet?
Problem 5 - Preparing the statement of cash flows-indirect method
Net Cash Used for Inv. Act. $(16,000)
Accountants for Smithson, Inc. have assembled the following data for the year ended December 31, 2016:
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2016
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2015
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Current Assets:
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Cash
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$102,700
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$ 20,000
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Accounts Receivable
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63,500
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69,500
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Merchandise Inventory
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85,000
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80,000
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Current Liabilities:
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Accounts Payable
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$ 57,900
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$ 56,000
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Income Tax Payable
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14,400
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17,000
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Transaction Data for 2016:
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Issuance of common stock for cash
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$ 42,000
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Payment of notes payable
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42,100
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Depreciation expense
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25,000
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Payment of cash dividends
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52,000
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Purchase of equipment with cash
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73,000
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Issuance of notes payable to borrow cash
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60,000
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Acquisition of land by issuing long-term notes payable
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118,000
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Gain on sale of building
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4,000
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Book value of building sold
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53,000
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Net income
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69,500
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Prepare Smithson's statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.