Question1. Listed below are account balances taken from the adjusted trial balance of Alpha Inc. as of December 31, 2012.
Accounts receivable 1,090,500
Accrued payroll expense 125,000
Bad debt 10,000
Financing receivables 250,000
Interest receivable 25,000
Bonds payable 375,000
Gain on discontinued operations, net of tax 400,000
Salaries and benefits 400,000
Accumulated other comprehensive loss 30,000
Notes receivable 360,000
Accrued income taxes 295,000
Cost of goods sold 2,750,000
Property loss 100,000
Oil Wells 548,000
Deferred taxes 100,000
Treasury bills 45,000
Pension payable 455,000
Prepaid rent 60,000
Inventory loss 20,000
Building loss 30,000
Revolving credit line 60,000
Furniture and fixtures 200,000
Interest payable 30,000
Bond sinking fund 150,000
Research and development 15,000
Gain on sale of investments 42,000
Accounts payable 620,000
Preferred stock 300,000
General and administrative 210,000
Accumulated depreciation 120,000
Allowance for uncollectible accounts 50,000
Marketing and selling 150,000
Leasehold improvement 50,000
Allowance for obsolete inventory 26,000
Income tax 600,000
Available for sale equity securities 35,000
Dividends payable 68,000
Common stock 400,000
Interest income 15,000
Capital lease 140,000
Loss on abandoned assets 50,000
Notes payable 500,000
Retained earnings 152,000
Unearned revenue 120,000
Treasury stock 50,000
Dividend income 14,500
Commercial paper 100,000
The following is additional information with regards to amounts appearing in the trial balance above:
Accounts receivable relate to sales in the normal course of business and are due within 90 days of the related sale. There is a $125,000 note receivable included in the accounts receivable balance that has a due date of November 30, 2013.
Financing receivable relate to sales in the normal course of business on a revolving credit arrangement. Installment receivables are non-interest bearing and are expected to be collected at a rate of $8,000 per month.
Interest receivable is related to Company cash and other investments as is expected to be collected in February 2013.
Cash includes $55,000 of highly liquid equity securities designated by the Company board of directors for future building replacement and $20,000 of treasury notes maturing on January 15, 2013.
Investments include $100,000 of trading securities, $200,000 of debt securities with a maturity date of January 15, 2014, and $140,000 of money market funds.
Prepaid rent relates to an advance payment for the period from January 1, 2013 – August 31, 2014.
Notes receivable relate to a loan made to a Company affiliate. The note requires the affiliate to make payments on the last day of each month beginning on July 31, 2013 equal to principle of $10,000 plus interest at 4%.
Land includes a $140,000 property on which the Company has a factory, $50,000 of land which the Company has a sales office that they believe they will have a gain on but they plan to relocate and sell in 2015, $50,000 of land that is being held for future expansion, and $40,000 of land adjacent to the land held for future expansion that the Company believes it can profit from as its value increases.
Capital lease includes an equipment lease, which requires principal payments of $1,000 per month, beginning on July 1, 2013.
Note payable includes a $200,000 note due December 31, 2013 and a $300,000 note, which requires payments of $20,000 plus 3% interest on the last day of each month beginning on April 1, 2013.
Bonds payable include on $75,000 bond maturing on March 30, 2014 and a $200,000 bond, which requires quarterly payments of $5,000 plus interest on March 31, June 30, September 30 and December 31 of each year and a $100,000 bond due on June 30, 2013.
The Company can borrow in aggregate up to $100,000 on its revolving line of credit. The Company is required to sign individual notes with a 90 day maturity period each time it borrows. The notes related to the amounts currently borrowed mature on March 15, 2013. Payments of interest only on the outstanding balance are due each December 31. The revolving credit line agreement expires on December 31, 2014.
Common Stock includes the proceeds 100,000 shares of $1 par value stock issued to investors at $4 per share. The Company charter authorizes the issue of 500,000 shares of common stock. Preferred stock includes 3000 shares of 5% stock issued at $100 per share.
Unearned revenue includes rent collected in advance at $10,000 per month for a portion of the company plant rented to another business.
Interest payable is due on January 3, 2013
One half of the bond sinking fund balance is related to the $75,000 bond, one quarter of the balance is related to the $100,000 bond and the remaining balance is related to the $200,000 bond.
Property loss arose from hurricane damage at a facility in Miami
Inventory loss relates to a write down of the inventory carrying value because cost exceeded market value at December 31, 2012
Building loss relates to the destruction of a facility by invaders from outerspace. The amount included in the trial balance is net of any related income tax impact
REQUIRED: Using all the information provided above prepare:
(1) A balance sheet for Alpha, Inc. as of December 31, 2012. The balance sheet should be prepared in proper form and format including all relevant headings, sections, captions, titles, totals, subtotals and disclosures one would expect to see on the balance sheet.
(2) A multiple step income statement for Alpha for the year ending December 31, 2012. The income statement must be prepared in proper form and format including all relevant headings, sections, captions, titles, totals, subtotals, and disclosures one would normally expect on the face of the income statement.
(3) Solutions must be prepare using either excel or word (excel is best).
Question2. Listed below are some balances of Omega, Inc for the year ending December 31, 2013 and as of December 31, 2012 and 2013
Year ending 12/31/13
Cost of goods sold 1,600,000
Rent expense 115,000
Insurance expense 80,000
Interest expense 5,000
Income tax expense 100,000
Payroll and benefit expense 225,000
Depreciation cost 70,000
Dividend income 30,000
Gain on sale of investments 45,000
Loss on building fire 35,000
Interest income 25,000
General and administrative cost 155,000
As of 12/31/12 12/31/13
Cash 100,000 1,595,000
Accounts receivable 325,000 350,000
Interest receivable 12,000 10,000
Inventory 400,000 375,000
Accrued payroll and benefits 75,000 88,000
Accrued rent 50,000 50,000
Prepaid insurance 80,000 60,000
Accrued general and administrative 55,000 50,000
Accrued income tax 20,000 65,000
The following is additional information with regards Omega during the year ending December 31, 2013:
Purchased $200,000 of machinery with a note payable
Paid a dividend on preferred stock of $100,000
Made capital lease payments of $80,000
Issued a $200,000 bond
Purchased Delta Stock for $225,000
Borrowed $700,000 under its line of credit
Purchased land for $50,000
Sold a building for $100,000 for $20,000 cash and $80,000 mortgage
Loaned $125,000 to the CEO
Sold a franchise for $130,000
Proceeds from sale of UAL stock $100,000
Made mortgage payments of $30,000
Repurchased Omega stock for $15,000
Received insurance proceeds of $125,000 related to building fire
Issued $150,000 of Omega common stock
Requirements: Using the information above for Omega Inc
(1) Prepare a complete cash flow statement for the year ending December 31, 2013 using the indirect method. The statement must include all titles, headings, captions, sections, totals, subtotals and disclosures one would normally expect on the face of the cash flow statement.
(2) Prepare the operating section of the cash flow statement for the year ending December 31, 2013 using the direct method.
(3) The cash flow statements should be prepared in proper form and format including all relevant headings, sections, captions, titles, totals and subtotals.