Corporate Reporting Financial Statement Project
Background: Bill and Eileen moved into a new community in the summer. Very quickly, they realized that most of the homes were owned by families who used the homes as vacation properties, hence were not living in the houses the majority of the time.
April 01, 2017 - Seeing an opportunity to provide a monitoring service for these non-residents using robot technology, Bill and Eileen formed Rancho Cordova Enterprises.
Events: The following events took place during the company's first year of business. After each event, create the appropriate journal entry if needed. If a journal entry is not required, explain why not. For each event, in the Journal Entry space, please record all the journal entries needed based on the event. For each event, please also record all adjusting journal entries or explain why one is not needed.
April 01, 2017 - A corporation was formed with a fiscal year equal to the calendar year end. The following accounting policies are adopted by the company. Buildings will use straight line depreciation and will be based on actual months used. Inventory accounting uses the LIFO method in conjunction with a perpetual inventory system. Accounts Receivable and Accounts Payable are recorded using the Gross Method, unless the event indicates otherwise. The estimated income tax rate is 25.00%.
Events -
1. April 1, 2017 - Rancho Cordova Enterprises is authorized to sell shares 20,000 of common stock with a par value of $100.00 to raise capital.
2. May 1, 2017 - Rancho Cordova Enterprises received a three year loan from the Colma Saving and Loan Company in the amount to of $200,000.00. The interest rate is 2.00% and is paid monthly based on a calendar year. The principal is paid monthly.
3. May 1, 2017 - Rancho Cordova Enterprises acquired three acres of land to locate a permanent office and service facility. $1,000,000.00 cash was paid for the land to the current owner. The land had back taxes of $40,000.00 which were paid to the local taxing authority as part of the settlement amount. Additionally,the land had an existing building which the company tore down at a cost of $40,000.00 but was able to salvage $10,000.00 in materials which it also sold for cash. The fees totaling $8,000.00 associating with titling and closing on the property as shown below were paid as well. Immediately after the closing meeting, the company put up a sign announcing the site of their new corporate headquarters. The sign cost $9,000.00 which was paid in cash.
4. May 31, 2017 - An invoice was received for incorporating expenses in the amount of $20,000.00. The invoice was processed and a check was written that day.
5. April 1, 2017 - Rancho Cordova Enterprises purchased $6,000.00 in office supplies and the invoice was processed and a check was written that day.
6. April 1, 2017 - Bill and Eileen invested $1,000,000.00 of their own money from their TV careers and received 10,000 shares of common stock from Rancho Cordova Enterprises. Remember you are Rancho Cordova Enterprises not the investors.
7. April 1, 2017 - A local bank, The Bank of Coalinga, agreed to loan Rancho Cordova Enterprises $5,000,000.00 for five years at an annual rate of 5.00% with interest payable on the outstanding balance, quarterly (Jul 1st, Oct 1st, Jan 1st and Apr 1st) and semi annual (Oct 1st and Apr 1st) principal payments in equal amounts. All required payments in 2017 are to be made. Presume the interest payments are made before any principal payment on the same date.
8. May 1, 2017 - Rancho Cordova Enterprises agreed to purchase Robots-R-Us for the purchase price for $1,250,000.00. Robots-R-Us has a patent on their robot technology, which includes their flight abilities, valued at $700,000.00 with five years remaining in its useful life. The below assets were also acquired.
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Totals
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Five units of Inventory for Sale
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250,000.00
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Trademark value
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150,000.00
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Accounts Payable
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15,000.00
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Land Held for Sale
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100,000.00
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9. April 1, 2017 - The company rented a temporary work space for $1,000.00 per month. The term of the lease is one year(s) and the company wrote a check for the entire amount.
10. May 1, 2017 - Beginning on the date shown, the company contracts for advertising in the local newspapers, magazine and church bulletins their service of monitoring your home with its Robots while the homeowners are away. The monthly cost of these advertisements are $4,000.00. To obtain this price, the company paid for one year's advertising in advance.
11. June 1, 2017 - "Beginning on the date shown, the company has fifteen employees. Monthly salary expenses, per employee, are $5,000.00, with Payroll Taxes equal to 20.00% of monthly salary expense. Of the total payroll tax amount, only 12.00% is deducted from the employee check and the remainder is the responsibility of the employer. Employees are paid at the end of each month and taxes on the fifteenth day after the end of each quarter.
Please create the journal entries for each month."
12. June 1, 2017 - The company placed one robot(s) into production by moving from inventory to service (this means for use in the business). Each robot has the useful life of four years and will have $2,000.00 in residual value after its usage. The company uses the Straight Line method of depreciation for robots.
13. May 1, 2017 - The company purchased five trucks for use in the business at the cost of $40,000.00 each. These are estimated to have the useful life of four years and each have a residual value of $5,000.00. The company uses the Straight Line method of depreciation for vehicles.
14. May 1, 2017 - The company purchased $150,000.00 spare parts for robots on account with terms of 1.00/5, net 30. The company uses the net method for recording purchases. The invoice was paid on May 4, 2017.
15. Various - The table belows shows the sales the company made during the year. All sales are on credit and are made on the first day of the month. While the contracts are sold as annual contracts, they are accounted for month to month since there is no penalty for a customer to cancel the contract at any time. Each contract is billed monthly at $35.00. Make separate journal entries for each month.
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Month
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New Contracts
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June
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40
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July
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225
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August
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1,100
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September
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1,300
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October
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1,800
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November
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1,900
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December
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2,000
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16. Various - The company collected the following amounts shown in the table below from subscription service contracts. Bad debts are estimated at 1.00% of total sales. Record separate journal entries for each month.
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Month
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Amount
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June
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-
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July
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1,400.00
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August
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8,000.00
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September
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45,000.00
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October
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85,000.00
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November
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140,000.00
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December
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200,000.00
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17. May 1, 2017 - Using its patent, the company signed a non-cancelable purchase agreement for 90 robots from Jupiter Corporation. 54 of these units are to be delivered in the current year with the remainder to be delivered next year. The per unit cost of $90,000.00 includes shipment and storage in the the company warehouse.
18. July 1, 2017 - The company started to build a new building with an estimated construction time of three months. A construction loan in the amount of $200,000.00 which is the amount estimated for the building costs. This loan bears 5.00% interest. The amounts shown in the below table are the actual expenditures each month on the project.
19. June 1, 2017 - The company sold a franchise for the service contracts to WhileURGone Corporation in Seattle, Washington. This purchase amount is comprised of an initial fee $50,000.00 for site selection, business planning and setup, and a $90,000.00 fee per year for two years for ongoing consulting and business support. In the agreement, the franchisee will sign a zero interest rate note for $180,000.00 with equal payment dues at the end of each year. WhileURGone paid in cash the initial franchise fee. The company has already provided the services associated with the initial fees and will provide consulting services during the two years of the term of the franchise arrangement. The market interest rate for similar loans is 4.00%.
20. July 1, 2017 - The company executed the purchase of 50 robots from Jupiter Corporation. The market price for each robot is $100,000.00. The terms are 1.00/10 net 30. Jupiter delivered the robots on August 1, 2017 and the company pays on August 6, 2017. The transaction is recorded using the net method
21. August 2, 2017 - The company robots have a sales price $200,000.00. The company sold 46 robots in 2017 to WhileURGone Corporation. These were all shipped FOB Shipping Point on August 02, 2017 and arrived two days later. All were sold on credit with terms 1.00/10 net 30. Half of these were paid within ten days and two unit(s) remain(s) unpaid as of the end of the year, with the remaining paid on September 03, 2017. It has been determined that 100% of this credit will be collected.
22. August 1, 2017 - The company wrote off Accounts Receivable that was deemed uncollectable in the amount of $600.00. The following month one quarter of the amount was collected.
23. Various - The company put one robot(s) into production use from its inventory each month from September to December. These robots have a useful life of four years and a residual value of $6,000.00 for each unit at the end their life.
24. October 1, 2017 - The company purchases $140,000.00 of furniture for the new building. The useful life of this furniture is seven years and has a residual value of $3,000.00. A check was issued on the last day of the month. The company uses the Straight Line method of depreciation for this type of asset.
25. July 1, 2017 - The company sold spare parts with a retail value of $40,000.00 to a customer on credit. The gross margin on these parts is 46.00%. The company records spare part sales using the net method with terms of 1.00/10 net 30. The customer pays $20,000.00 towards this purchase on July 6, 2017.
26. November 1, 2017 - The company vacates the temporary facility and moves into the new facility which has an expected life of 20 years with a residual value of $10,000.00. The temporary facility is subleased for $2,500.00 per month for the remainder of the term of the lease. The new tenant will expected to move in at the start of the next month Today, the company paid off the construction loan.
27. December 1, 2017 - The sublessor moves into the temporary facility and will pay the rent on the 1st day of the month after occupancy.
28. December 31, 2017 - The company received an investment statement showing realized investment gains of $100,000.00, which was added to the existing investment. The statement also showed unrealized investment gains of $90,000.00.
29. June 1, 2017 - The company invested $200,000.00 in Stocks using Robinson and Robinson Investment Group.
30. April 1, 2017 - The company purchased $8,000.00 in office supplies on credit.
31. December 31, 2017 - The company completed a physical inventory of spare parts and the ending balance was $122,900.00.
Attachment:- Assignment File.rar