|December 31, 2013|
|Available-for-Sale Securities – At Fair Value|
|Investment in Ferrari Corp Stock||41,250|
|Accounts Receivable||$ 350,400|
|Less: Allowance for Doubtful Accounts||15,250|
|Restricted as Collateral Against Loan||18,200||$ 316,950|
|Inventories – At Average Cost||546,500|
|Supplies on Hand||27,850|
|Total Current Assets||$ 2,788,550|
|Investment in Sampson Corp Stock||48,750|
|Investment in Durango Corp Bonds||51,500||100,250|
|Property, Plant, and Equipment|
|Land – At Cost||585,000|
|Buildings – At Cost||1,020,500|
|Less: Accumulated Depreciation||140,000||1,245,500|
|Total Property, Plant, and Equipment||1,830,500|
|Total Assets||$ 4,782,300|
|Liabilities and Stockholders’ Equity|
|Notes Payable||$ 336,870|
|Accrued Interest on Notes Payable||124,268|
|Accrued Salaries, Wages, and Other Liabilities||42,000|
|Total Current Liabilities||$ 586,888|
|Twenty-Year, 10% Bonds, due 12/31/2020||800,000|
|Less: Discount on Bonds Payable||73,010||726,990|
|Long Term Notes Payable||677,500|
Worksheet 2: Problem A – Balance Sheet
SnackTastics’s Corp. makes and distributes snacks and beverages which are sold in kiosks at malls, entertainment venues and big-box stores. Below is a list of all of their accounts as of December 31, 2013:
|10% Bonds, 20-year bonds, due 12/31/2020||800,000|
|Accumulated Amortization – Patent||34,920|
|Accumulated Amortization – Trademark||34,650|
|Accumulated Depreciation – Building||120,000|
|Accumulated Depreciation – Equipment||60,000|
|Additional Paid-in Capital – preferred stock||28,000|
|Additional Paid-in-Capital, common stock||150,000|
|Allowance for Doubtful Accounts||15,250|
|Bad Debt Expense||9,750|
|Common Stock ($5 par)||300,000|
|Cost of Goods Sold||129,850|
|Depreciation Expense (Building & Equipment)||35,000|
|Discount on Bonds Payable||73,010|
|Income Tax Expense||242,903|
|Investment in Ferrari Corp stock||41,250|
|Investment in Sampson Corp stock||48,750|
|Investment in Durango Corp bonds||51,500|
|Long-term Notes Payable||677,500|
|Preferred Stock, ($10 par)||100,000|
|Short-Term Notes Payable||336,870|
|Unrealized holding gain – equity||3,350|
- The building had a $220,500 salvage value and a 50 year useful life, however, SnackTastics, Inc. only expected to use the building for 40 years. The building was purchased on Jan 1, 2008. SnackTastics uses the straight-line method for depreciation purposes.
- The company had purchased 1,000 shares of Sampson Company stock three years ago for a total of $37.50 per share. They intended to hold the Sampson Company stock for a while, although the exact holding period was undetermined.Non-Current Asset – Long Term Investment
- SnackTastics Corp. purchased 10,000 shares of Ferrari Corp stock two weeks ago for a total of $41,250. They expect to sell Ferrari Company stock as soon as it reaches $4.50 per share, which is expected to happen in the next two months.Short Term Investment – Available for Sale
- SnackTastics purchased the 10-year bonds of Durango Corp. last year. They plan to hold them for two or three years, at which time they hope to sell them and make a profit.Non-Current Asset – Long Term Investment
- Upon further evaluation, it was determined that $180,000 of the land was not being used in operations.
- SnackTastics Corp. had pledged $18,200 of Accounts Receivable as collateral against a $15,000 loan it obtained from First National Bank.
- The value of the inventories was determined using the lower of cost, using LIFO, or market.
- SnackTastics had $172,000 of inventory out on consignment with Stadium Concessions Corp.
- Total Inventory = 374,500 + 172,000 = $546,500
- The interest expense includes interest on the bonds and notes payable,depreciation expense includes depreciation on both the building and equipment and amortization expense includes amortization on both the Trademark and Patent.
- The company is authorized to issue 100,000 shares of common stock and 25,000 shares of preferred stock. There have been no additional issuances of stock, nor have there been any repurchases of stock since the initial issuance.
- The unrealized holding gain reported above pertains to the Available-for-Sale security(ies) and must be reported in the equity section of the Balance Sheet. You do not need to do a statement of comprehensive income for this problem.
Required: (You MUST show all work to receive full credit)
- Prepare a classified balance sheet in good form, including all disclosures.
Utilities Expense: 22,660
Supplies Expense: 47,750
Wages Expense: 255,640
Advertising Expense: 86,700
Rent Expense: 88,650
Total Prepaid Expenses: $501,400
- What was the beginning Retained Earnings amount (as of December 31st, 2012?) Hint: You need to find net income to solve for this.
- What is the difference between authorized, issued and outstanding shares of stock?
- Authorized shares are the number of stock units that a publicly traded company can issue.
- Issued shares of stock are the number of authorized shares that is sold to and held by the shareholders of a company. Issued shares include the stock that a company sells publicly in order to generate capital.
- Outstanding shares are a company’s stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shared owned by the company’s officers and insiders.
- What principle, constraint or assumption dictates that we record inventories at the lower of cost or market?
- What is the company’s current ratio? Show formula & answer.
- What are the NET assets of the business? Show formula & answer.
- Separate the accounts into Income Statement, Retained Earnings and Balance Sheet accounts. (I usually highlight mine in different colors, but you are free to use whatever method works best for you).
- Determine the Accumulated Depreciation for the building before solving for ending Retained Earnings.
- Remember, your Balance Sheet “equation” is the same as the Accounting Equation.
- To solve for beginning Retained Earnings, you first need to solve for ending Retained Earnings and then work backwards.
- You will only need to adjust the balance in one balance sheet account and add one balance sheet account for this problem.
- See pages 218 and 221 of the loose leaf, 15th edition of the text for help on how to classify the various Investments.
- Financial ratios can be found on page 246 of the loose-leaf, 15th edition of the text.
Problem B: Statement of Cash Flows:
Billingsley Company presented the following comparative financial data at December 31, 2013:
|Building and Equipment||300,000||200,000|
|Additional paid in capital||60,000||60,000|
|Total liabilities and stock-||$341,000||$244,000|
Additional information for the year 2013:
- Equipment costing $80,000 was sold at a $1,000 gain and was 30 percent depreciated at the time of sale
- Depreciation expense was recorded.
- Net income was $75,000.
- In good form, prepare the operating section of the statement of cash flows for 2013 using the INDIRECT METHOD.
- Can a company have positive net income and negative cash flows or negative income and positive cash flows? Why or why not?
- You are only dealing with the operating section of the Statement of Cash flows for this problem, so concentrate on the accounts that affect that section.
- Do a T-account for Equipment and one for the Accumulated Depreciation accounts to help determine the depreciation expense for the period.
- Question 2 was covered in chat, so be sure to review the archive if you missed it.