Part 1:
Robert and Chip organized Chipper Corporation on January 1, 2008. Each of these owners invested $100,000 cash and received shares of stock. Below are selected transactions that were completed during January 2008:
(1) Owner's invested $100,000 each to start the business.
(2) Prepaid three (3) months rent for $15,000 ($5,000 each month).
(3) Purchased equipment by signing a $75,000 note payable for $50,000 and paying the remainder in cash.
(4) Purchased two service vehicles for $24,000 each, paid $20,000 cash.
(5) Purchased $1,000 of supplies on account.
(6) Sales revenue on account was $85,000.
(7) Paid expenses of $48,000.
(8) Collected $42,000 from customers on account.
(9) Paid $2,000 on the note payable for the equipment and $1000 for the note payable for the service vehicles.
Record each transaction in journal form and post to the appropriate accounts in the ledger. Prepare a Trial Balance for January 31, 2008.
Part 2:
(A) On July 1, 2009, Bass Company paid a two-year insurance premium. On that date the following journal entry was made:
The annual accounting period ends on December 31.
A. How much of the premium should be reported as expense on the 2009 income statement?
B. What is the amount of prepaid insurance which should be reported on the balance sheet at December 31, 2009?
C. Give the adjusting entry that should be made on December 31, 2009.
(B) Bridge Company keeps a small inventory of supplies used for cleaning and maintenance purposes. On January 1, 2008 the inventory of supplies on hand was $2,500. During the year, supplies purchased were debited to the supplies account in the amount of $6,200. On December 31, 2008, the inventory count of supplies in the storeroom was $1,750. Provide the journal entry to record the purchase of supplies during 2008. Provide the adjusting entry required on December 31, 2008.
Part 3:
Preparing a Statement of Cash Flows (Indirect Method)
Part 4:
On January 1, 2009, Clintwood Corporation issued a $50,000, ten-year, 6% bond payable (interest payable semi annually on June 30 and December 31). For the three assumptions below, complete the following schedule assuming the accounting year ends December 31, and straight-line amortization is used:
D. Provide the June 30 and December 31, 2009 journal entries to record interest expense and the payment of interest.
Part 5:
Computing Depreciation under Alternative Methods
Part 6:
Computing Liquidity Ratios
Part 7
Matthew is considering several possible investment alternatives:
Option A: Matthew could receive $8,000 today.
Option B: Matthew could receive $2,500 at the end of each of the next four years.
Option C: Matthew could receive $12,000 five years from now.
Required:
1. Calculate the net present value for each option assuming that Matthew can earn 7 percent on any investment funds.
2. Which option results in the greatest financial benefit to Matthew?
3. If Matthew earns 10 percent, will that change your answer to # 2 above? Please explain.
Part 8
Analyzing the Effects of Four Alternative Inventory Methods