Assignment 1:
Exercise 1: Open Kellogg's Annual Reports and find paragraph entitled "property" under ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, and explain what the term impairment means.
Exercise 2: Journalize the following transactions for the Round Company for 201X and show all calculations:
• Jan. 1 Sold a truck for $1,300 that cost $6,700 and had accumulated depreciation of $6,000.
• Feb 10 A machine costing $3,100 with accumulated depreciation of $2,150 was destroyed in a fire. The insurance company settled the claim for $450.
• May 1 Traded in a machine costing $18,000 with $14,500 of accumulated depreciation for a new machine costing $25,100 with a trade-in allowance of $3,000. Note that depreciation is up-to-date. The loss is to be recognized.
• July 8 Traded in a machine costing $46,000 with $34,000 of accumulated depreciation (which is up-to-date) for a new machine for a cash price of $47,000 and a trade-in allowance of $15,000.
• Aug. 9 Journalize the May 1 transaction using the income tax method.
• Sept. 12 A truck costing $7,500 and fully depreciated was disposed of.
Exercise 3: Record the following transactions in the general journal of White Company for 201X:
• Feb. 5 Purchased land for $93,000. The $93,000 included attorney's fees of $6,300.
• Feb. 18 White Company decided to pave the parking lot for $5,400.
• Mar. 24 Purchased a building for $91,000, putting down 34% and mortgaging the remainder.
• Mar. 29 Bought equipment for $36,000. Freight and assembly were an additional $3,600.
• May 10 Added a new wing for $160,000 to building that was purchased on March 24.
• June 15 Performed ordinary repair work on equipment purchased March 29, $850, to maintain its normal operations.
• July 1 Bought a truck for $14,500.
• Oct. 15 Added a hydraulic loader to truck, $2,300.
• Nov. 30 Truck purchased in July was brought in for grease and oil, $32.
• Dec. 30 Overhauled truck's motor for $900, extending its life by more than one year.
• Dec. 31 Changed tires on truck, $400.
Exercise 4: At the beginning of January 201X, the stockholders' equity of Mountain View Corporation consisted of the following:
|
Paid-In Capital
|
|
|
|
Common Stock, $30 par value, authorized 60,000 shares, 15,000 shares issued and outstanding
|
$450,000
|
|
|
Paid-In Capital in Excess of Par Value - Common
|
80,000
|
|
|
Total Paid-In Capital by Common
|
|
|
|
Stockholders
|
$530,000
|
|
|
Retained Earning
|
170,000
|
|
|
Total Stockholders' Equity
|
|
$700,000
|
|
|
|
|
Figure 4
Tasks:
1. Record the transactions in general journal form.
2. Prepare the stockholders' equity section at year-end using the Blueprint as a guide.
3. Prepare a statement of retained earnings at December 31, 201X. Accounts are provided in the working papers that accompany this text. Be sure to put in the beginning balances.
• June 5 Mountain View Corporation purchased 1,000 shares of treasury stock at $34.
• June 25 The board of directors voted a $0.20 per share cash dividend payable on July 20 to stockholders of record on July 4.
• July 20 Cash dividend declared on June 25 is paid.
• Sept. 10 Sold 300 shares of the treasury stock at $43 per share.
• Sept. 30 Sold 700 shares of the treasury stock at $33 per share.
• Oct. 15 The board of directors declared a 10% stock dividend distributable on January 2 to stockholders of record on November 2. The market value of the stock is currently $50 per share.
• Dec. 31 Closed the net income of $70,000 in the Income Summary account to Retained Earnings.
Exercise 5: The following is the stockholders' equity of Piesco Corporation on October 1, 201X:
|
Paid-In Capital
|
|
|
|
|
Preferred 17% Stock, $11 par value, authorized 6,300 shares, shares, 3,300 shares issued and outstanding
|
|
$36,300
|
|
|
Common Stock, $8 par value, authorized 24,000 shares,
10,000 shares issued and outstanding
|
|
80,000
|
|
|
Additional Paid-In Capital
|
|
|
|
|
Paid-In Capital in Excess of Par Value - Preferred
|
$10,000
|
|
|
|
Paid-In Capital in Excess of Par Value - Common
|
7,000
|
|
|
|
Paid-In Capital in Excess of Par Value - Stock Dividend
|
2,500
|
|
|
|
Total Additional Paid-In Capital
|
|
19,500
|
|
|
Total Paid-In Capital
|
|
$135,800
|
|
|
Retained Earnings
|
|
180,000
|
|
|
Total Stockholders' Equity
|
|
|
$315,800
|
Figure 5
Tasks:
1. Journalize the transactions in general journal form.
2. Prepare the stockholders' equity section of the balance sheet using the legal capital approach as of December 31, 201X.
The working papers that accompany this text have accounts to update ledger balances. Be sure to put in the beginning balances. Use the Blueprint as a guide to the setup of stockholders' equity.
• Oct. 3 Declared a $0.50 per shared dividend on the common stock and a $1.20 per share dividend on the preferred. (The Dividends
Payable account will record amounts for both common and preferred, although companies could set up Common Dividend Payable and Preferred Dividend Payable accounts.)
• Nov. 15 Dividends were paid that were declared on October 3.
• Nov. 18 Purchased 340 shares of its own common stock at $14 per share.
• Nov. 25 Reissued 90 shares at $17 per shared.
• Nov. 26 Declared a 15% stock dividend on common. Market value of stock is $48 per share.
• Dec. 29 Distributed stock dividend declared on November 26.
• Dec. 30 Reissued 80 shares of treasury stock at $12 per share.
• Dec. 31 Closed the Income Summary account, which had net income of $89,000, to Retained Earnings.
Assignment 2:
Exercise 1: Open the most recent Kellogg's Annual Report and explain why Kellogg's is not classified as a partnership.
Go to the consolidated balance sheet in the annual report for Kellogg's Company. What is the amount of retained earnings in the most recent year? What is the par value of the stock? (Click on the Kellogg pdf file)
Exercise 2: In Good Company
The waitress set down a plate of nachos and two pints of beer in front of Stan and his old college buddy, Ron Ebbers. Ever since they'd run into each other at Stan's Subway restaurant, the two had rekindled their friendship over beer and nachos at a local restaurant.
"Sales still on the up and up?" Ron asked Stan. "Yep. It just doesn't seem to matter how weak the economy is," said Stan. "People will always want a sandwich that's healthy, great tasting, and a good value."
And now," Stan lifted a glass, " salu-a toast-because as of today I'm a corporation!" "Cheers, Stan the Man!" exclaimed Ron and clinked Stan's beer mug. "But doesn't incorporating cost you more money in legal fees and taxes?" "Well, that may be true, but if I don't incorporate and anything goes wrong or some wacko sues me, it could cost me my shirt! Now I have limited liability, but I still pay wages to my employees, send in my royalty fees to Subway, and muchos profits still go to me."
"Maybe I should buy stock in Subway," Ron interrupted. "I've been dabbling in the market lately and Subway seems like a good bet!" "Unfortunately, you can't buy stock in Subway," said Stan. "Doctor's Associates, the corporation that owns the Subway brand, is privately owned by the founders Fred DeLuca and Dr. Peter Buck.
"Doctor's Associates?" Stan exclaimed. "That's strange. I know the food has helped people lose weight and eat healthy, but is Subway run by a health-care outfit?"
"No, it's actually kind of interesting. In 1965 Fred DeLuca was just a teenager who wanted to go to college and become a doctor, but he didn't have enough money.
Then his family friend, Peter Buck, loaned him the money to start a submarine sandwich joint. DeLuca, of course, never did become a doctor, but Peter Buck holds a Ph.D. in nuclear physics, so they called themselves Doctor's Associates-they're the ‘doctors' and we franchisees are the ‘associates.'"
"I guess we all have dreams that we don't carry out," Ron mused. "Hey, don't look so triste, amigo. I know you're stuck in a dead-end job now, but maybe now is the time to think about new opportunities."
"Whaddaya mean?" Ron asked.
"There's a great space on Alameda Avenue on the other side of Los Palmos-near that fancy new apartment complex. I've been thinking of eventually opening up another store, but I don't want to go it alone. However, I might consider going into a partnership with you to own Subway number 2."
"Well, given the liability risks you just mentioned-which I assume apply to partnerships as well as sole proprietorships, what about a corporation?" said Ron eagerly. "You could be the majority shareholder and I could have a smaller interest in the restaurant until I learn the ropes and eventually buy you out."
"Whoa there. Let's not talk about buying anyone out just yet," laughed Stan. "Before you do anything-if you're serious about being a Subway owner-you'll need to go to Subway University."
Ron raised his glass, "Salute."
"No man, salud," corrected Stan. "A toast. To opportunidades del futuro y amistad. To future opportunities and friendship."
Tasks
1. What are all the advantages and disadvantages of forming a corporation?
2. What do you think is the best way for Stan and Ron to own a Subway restaurant jointly? Partnership or corporation? Why?
3. From the following partial mixed list, select the appropriate titles and prepare a stockholders' equity section using the source-of-capital approach as shown in the Blueprint example for Ununoctium Corporation on July 31, 201X.
|
Office Equipment
|
$110,000
|
|
Land
|
215,000
|
|
Paid-In Capital in Excess of Par Value-Preferred Stock
|
85,000
|
|
Building
|
70,000
|
|
Accounts Receivable
|
135,000
|
|
Notes Receivable
|
38,000
|
|
Organization Costs
|
10,500
|
|
Common Stock, $8 par value (60,000 shares issued and outstanding; 85,000 shares authorized)
|
81,000
|
|
Retained Earnings
|
200,000
|
|
Subscriptions Receivable-Common Stock
|
81,000
|
|
Patents
|
12,000
|
|
Preferred 17% Stock, $49 par value (6000 shared issued; 8,500 shared authorized)
|
294,000
|
|
Common Stock Subscribed at Par
|
240,000
|
|
Paid-In Capital in Excess of Par Value-Common Stock
|
17,000
|
Figure 6
4. Perform the following:
a. Journalize the entries to record the stock subscription plan for Orange Co. On June 1, Orange received subscriptions for 500 shares of $24 par value common stock at $48 per share. The buyer will pay two equal installments on August 31 and November 30.
b. From the following, calculate the dividends for common and preferred stock:
o 8% fully participating preferred stock.
o The board declared a $210,000 dividend.
o Preferred stock 5,000 shares, $50 par value; common stock 10,000 shares, $100 par.
5. The partnership of Jackson, Rackley, and Surber is being liquidated. All gains and losses are shared in a 3:2:1 ratio. Before liquidation their balance sheet looks as follows:
|
Cash
|
$23,000
|
Liabilities
|
$7,700
|
|
Other Assets
|
15,000
|
A. Jackson, Capital
|
11,000
|
|
|
C. Rackley, Capital
|
18,100
|
|
|
J. Surber, Capital
|
1,900
|
|
Total Assets
|
38,700
|
Total Liability + Equity
|
$38,700
|
Figure 7
Journalize the entries needed in the liquidation process under the following independent situations and assume a date of July 1, 201X, for sale of assets and a date of July 15 to pay off liabilities and distribute cash to partners:
a. Situation 1: Sold other assets for $33,900.
b. Situation 2: Sold other assets for $6,900.
c. Situation 3: Sold other assets for $2,100. Surber cannot cover his deficit.
Assignment 3:
Exercise 1: On January 1, 201X, Acorn Corporation issued $600,000 of 10%, 20-year bonds for $509,580, yielding a market rate of 12%. Interest is paid on July 1 and December 31. Acorn uses the interest method to amortize the discount.
Tasks:
a. Prepare an amortization schedule for the first three semiannual periods.
b. Prepare journal entries to record the following:
o Bond issue on January 1.
o Semiannual interest payments on July 1 and December 31 as well as amortization of discount.
c. If the bond were issued on March 1 and interest was paid on September 1 and March 1, what would be the year-end adjusting entry on December 31, 201X, to record accrued interest and amortization of discount?
Exercise 2: Open the most recent Kellogg's Annual Report and find note 7 for Debt. What is Kellogg's scheduled repayment of long-term debt in the most recent year (in millions)?
Go to the annual report for Kellogg's Company and find the consolidated balance sheet. What is the cost of treasury stock for Kellogg's in the last two years?
Exercise 3: From the following, prepare the long-term liabilities section of a balance sheet:
a. Sinking Fund $275,000
b. Premium on 13% bonds 7,000
c. Discount on 16% bonds 13,000
d. 13% Bonds Payable 600,000
e. 16% Bonds Payable 180,000
Exercise 4: At the beginning of January 201X, the stockholders' equity of Mountain View Corporation consisted of the following:
Paid-In Capital:
|
Paid-In Capital:
|
|
|
|
Common Stock, $30 par value, authorized 60,000 shares, 15,000 shares issued and outstanding
|
$450,000
|
|
|
Paid-In Capital in Excess of Par Value-Common
|
80,000
|
|
|
Paid-In Capital by Common
|
|
|
|
Stockholders
|
$530,000
|
|
|
Retained Earnings
|
170,000
|
|
|
Total Stockholders' Equity
|
|
$700,000
|
Figure 8
Tasks:
a. Record the transactions in general journal form.
b. Prepare the stockholders' equity section at year-end using the Blueprint as a guide.
c. Prepare a statement of retained earnings at December 31, 201X.
Accounts are provided in the working papers that accompany this text. Be sure to put in the beginning balances.
201X
• June 5 Mountain View Corporation purchased 1,000 shares of treasury stock at $34.
• June 25 The board of directors voted a $0.20 per share cash dividend payable on July 20 to stockholders of record on July 4.
• July 20 Cash dividend declared on June 25 is paid.
• Sept. 10 Sold 300 shares of the treasury stock at $43 per share.
• Sept. 30 Sold 700 shares of the treasury stock at $33 per share.
• Oct. 15 The board of directors declared a 10% stock dividend distributable on January 2 to stockholders of record on November 2. The market value of the stock is currently $50 per share.
• Dec. 31 Closed the net income of $70,000 in the Income Summary account to Retained Earnings.
Exercise 5: BUCKING TRADITION
"A convenience store?" asked Stan, incredulous. "Yep, a convenience store," replied Carrie Zabrinsky, "or, as they say in the business, a c-store." Stan had arranged a meeting with his Subway development agent, Carrie, to discuss expansion of his Subway franchise to another location. His future partner, Ron, was almost through with his training program at Subway University, and Stan had just promoted his Sandwich Artist, Rashid, to manager. By leaving a lot of the day-to-day operations in Rashid's hands, Stan planned to help Ron open the new Subway. Everything seemed to be going according to plan, yet he hadn't bargained on the new location being in a Pitt's Stop convenience store!
"Stan, just hear me out," Carrie insisted. "That site you have your eye on is extremely expensive. Also, with nothing around it but that new luxury apartment complex and some very upscale shops, it won't generate the foot traffic you need. This c-store, however, is in a prime high-traffic location." "But the square footage is so small," Stan protested, pointing to the floor plan in front of him.
"Listen, Stan, in the fast-food industry, Subway leads the pack in opening nontraditional units. We have more than 3,700 Subway restaurants in c-stores, airports, gas stations, schools, grocery stores, and even in hospitals. Headquarters wouldn't encourage these arrangements if they weren't highly lucrative. Sure, these smaller units typically generate less revenue than a full-size restaurant, but they're also cheaper to build and maintain. Look at the figures: Opening in a c-store typically costs as little as $30,000 to develop, while the traditional venue is more like $66,000."
"And you've got a captive audience, I guess," admitted Stan, "particularly in hospitals and schools. What I would've given to eat a sweet onion chicken teriyaki sandwich instead of that stuff that passed for food in high school!"
"Now you're getting the picture," Carrie smiled. "Just imagine. You go into the c-store at 10:00 P.M. to buy a quart of milk or some batteries and then you smell fresh-baked gourmet bread. Your stomach growls and you buy a Subway 6-inch."
"Okay, okay," Stan said. "Once I get some figures for the lease and find out more about this Pitt's Stop's business and its management, I'll run it by Ron. I'm not sure it is what he had in mind when he quit his job to own a Subway."
"Well, he had profits in mind, didn't he?" asked Carrie.
Tasks
a. How might opening a Subway in a convenience store reduce expenses?
b. How might this arrangement increase sales? Suppose you're Stan's development agent and you want him to open a Subway in a gas station. How would you sell him on this arrangement?
c. Like all corporations, Subway's goal is to increase earnings per share. How does expansion into nontraditional sites help achieve this goal?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.