Prepare journal entries to record the December transactions in the General Journal Tab in the excel template file “Accounting Cycle Excel Template.xlsx”.

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QUESTION 1

Required:#1.Prepare journal entries to record the December transactions in the General Journal Tab in the excel template file “Accounting Cycle Excel Template.xlsx”. Use the following accounts as appropriate: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation, Accounts Payable, Wages Payable, Common Stock, Retained Earnings, Dividends, Service Revenue, Depreciation Expense, Wages Expense, Supplies Expense, Rent Expense, and Insurance Expense.
1-DecBegan business by depositing $6000 in a bank account in the name of the company in exchange for
600 shares of $10 per share common stock.
1-DecPaid the rent for the current month, $500 .
1-DecPaid the premium on a one-year insurance policy, $480 .
1-DecPurchased Equipment for $3600 cash.
5-DecPurchased office supplies from XYZ Company on account, $300 .
15-DecProvided services to customers for $5400 cash.
16-DecProvided service to customers ABC Inc. on account, $2500 .
21-DecReceived $1500 cash from ABC Inc., customer on account.
23-DecPaid $170 to XYZ company for supplies purchased on account on December 5 .
28-DecPaid wages for the period December 1 through December 28, $4200 .
30-DecDeclared and paid dividend to stockholders $200 .
#2.Post all of the December transactions from the “General Journal” tab to the T-accounts under the “T-Accounts” tab in the excel template file “Accounting Cycle Excel Template.xlsx”. Assume there are no beginning balances in any of the accounts.  
#3.Compute the balance for each T-account after all of the entries have been posted. These are the unadjusted balance as of December 31.
#4.Prepare the unadjusted trial balance under the “Unadjusted Trial Balance” tab in the excel template file “Accounting Cycle Excel Template.xlsx” .
Provide the total of the credit column from the Unadjusted Trial Balance
#5.Record the following four transactions as adjusting entries under the “General Journal” tab.
31-DecOne month’s insurance has been used by the company $40.
31-DecThe remaining inventory of unused office supplies is $90.
31-DecThe estimated depreciation on equipment is $60.
31-DecWages incurred from December 29 to December 31 but not yet paid or recorded total $450.
#6.Post all of the adjusting entries to the T-accounts under the “T-Accounts” tab. Compute the balance for each T-account after all of the adjusting entries have been posted. These are the adjusted balance as of December 31.
#7.Prepare the adjusted trial balance under the “Adjusted Trial Balance” tab as of December 31 in the excel template file “Accounting Cycle Excel Template.xlsx” .
Provide the following accounts balances from the Adjusted Trial Balance:
Cash   
Accounts Receivable
Supplies   
Prepaid Insurance
Equipment
Accumulated Depreciation
Accounts Payable
Wages Payable   
Common Stock
Retained Earnings   
#8.Prepare Income Statement, Statement of Stockholder’s Equity, and Classified Balance Sheet under the “Financial Statements” tab for the month ended December 31, 20XX in the excel template file “Accounting Cycle Excel Template.xlsx”.
Provide the following amount from the Income Statement:
Service Revenue
Depreciation Expense   
Wages Expense   
Supplies Expense
Rent Expense
Insurance Expense
Net Income
Provide the following account balance from the Statement of Stockholders’ Equity:
Dividends
Provide the following account balances from the Balance Sheet:
Current Assets                            
Long-Term Assets                  
Total Liabilities                
Total Stockholder’s Equity            
Cash                         
#9.Record the closing entries under the “General Journal” tab.
#10.Post all of the closing entries to the T-accounts under the “T-Accounts” tab. Compute the balance for each T-account after all of the closing entries have been posted.
Provide the ending balance of Cash at December 31 from the T-account                   
Provide the balance of the Retained Earnings T-account after closing entries have been posted.  
Does the ending balance of the Retained Earnings T-account agree with the balance of Retained Earnings on the Balance Sheet?
Check Point: Total Assets$   8,820.00

Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest , AAP and gain on upstream intercompany equipment sale

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QUESTION 14

Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest , AAP and gain on upstream intercompany equipment sale

A parent company acquired its 75% interest in its subsidiary on January 1, 2011. On the acquisition date, the total fair value of the controlling interest and the noncontrolling interest was $350,000 in excess of the book value of the subsidiary’s Stockholders’ Equity. All of that excess was allocated to a Royalty Agreement, which had a zero book value in the subsidiary’s financial statements (i.e., there is no Goodwill). The Royalty Agreement has a 7 year estimated remaining economic life on the acquisition date. Both companies use straight line depreciation and amortization, with no salvage value.

In January 2014, the subsidiary sold Equipment to the parent for a cash price of $250,000. The subsidiary acquired the equipment at a cost of $480,000 and depreciated the equipment over its 10-year useful life using the straight-line method (no salvage value). The subsidiary had depreciated the equipment for 6 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 4 year useful life.

Following are pre-consolidation financial statements of the parent and its subsidiary for the year ended December 31, 2016. The parent uses the equity method to account for its Equity Investment.

ParentSubsidiaryParentSubsidiary
Income statement:Balance sheet:
Sales$3,400,000$900,000Assets
Cost of goods sold(2,400,000)(500,000)Cash$619,500$250,000
Gross profit1,000,000400,000Accounts receivable530,000420,000
Income (loss) from subsidiary85,875Inventory900,000550,000
Operating expenses(522,000)(225,000)PPE, net3,500,0001,000,000
Net income$563,875150,000Equity investment454,125
$6,003,625$2,220,000
Statement of retained earnings:
BOY retained earnings$1,799,750$200,000Liabilities and stockholders’ equity
Net income563,875150,000Accounts payable$340,000$250,000
Other current liabilities400,000300,000
Dividends(100,000)(30,000)Long-term liabilities1,500,0001,100,000
EOY retained earnings$2,263,625$320,000Common stock200,000100,000
APIC1,300,000150,000
Retained earnings2,263,625320,000
$6,003,625$2,220,000

a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.

Do no enter any negative answers in part a.

UnamortizedUnamortizedUnamortizedUnamortizedUnamortizedUnamortizedUnamortized
AAP2011AAP2012AAP2013AAP2014AAP2015AAP2016AAP
1/1/2011Amortization1/1/2012Amortization1/1/2013Amortization1/1/2014Amortization1/1/2015Amortization1/1/2016Amortization1/1/2017
Royalty agreementAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswer
Controlling interest:
Royalty agreementAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswer
Noncontrolling interest:
Royalty agreementAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswerAnswer

b. Calculate and organize the profits and losses on intercompany transactions and balances.

Use negative signs with answers that are reductions.

DownstreamUpstream
AnswerAnswer
Less:AnswerAnswer
AnswerAnswer

c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders’ equity of the subsidiary.

Use negative signs with answers that are reductions.

Equity investment at 1/1/16:
Common stockAnswer
APICAnswer
Retained earningsAnswer
Answer
Less:Answer
Answer
Equity investment at 12/31/16:
Common stockAnswer
APICAnswer
Retained earningsAnswer
Answer
Less:Answer
Answer

d. Reconstruct the activity in the parent’s pre-consolidation Equity Investment T-account for the year of consolidation.

Equity Investment
Balance at 1/1/16AnswerAnswer
Net incomeAnswerAnswerDividends
AnswerAnswer
Balance at 12/31/16AnswerAnswer

e. Independently compute the owners’ equity attributable to the noncontrolling interest beginning and ending balances starting with the owners’ equity of the subsidiary.

Use negative signs with answers that are reductions.

Noncontrolling interest at 1/1/16:
Common stockAnswer
APICAnswer
Retained earningsAnswer
Answer
Less:Answer
Answer
Noncontrolling interest at 12/31/16:
Common stockAnswer
APICAnswer
Retained earningsAnswer
Answer
Less:Answer
Answer

f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income.

Use negative signs with answers that are reductions.

Consolidated:
Parent’s stand-alone net incomeAnswer
Subsidiary’s stand-alone net incomeAnswer
Plus:Answer
Less:Answer
Subsidiary’s adjusted stand-alone net incomeAnswer
Consolidated net incomeAnswer
Parent:
Parent’s stand-alone net incomeAnswer
75% Subsidiary’s stand-alone net incomeAnswer
Plus:Answer
Less:Answer
75% of subsidiary’s stand-alone net incomeAnswer
Consolidated net income attributable to the parentAnswer
Subsidiary:
25% of subsidiary’s stand-alone net incomeAnswer
Plus:Answer
Less:Answer
Answer

g. Complete the consolidating entries according to the C-E-A-D-I sequence and complete the consolidation worksheet.

Consolidation Worksheet
DescriptionDebitCredit
[C]Equity incomeAnswerAnswer
AnswerAnswer
DividendsAnswerAnswer
Equity investmentAnswerAnswer
AnswerAnswer
[E]Common stockAnswerAnswer
APICAnswerAnswer
AnswerAnswer
Equity investmentAnswerAnswer
AnswerAnswer
[A]AnswerAnswer
Equity investmentAnswerAnswer
AnswerAnswer
[D]Operating expensesAnswerAnswer
AnswerAnswer
[Igain]Equity investmentAnswerAnswer
AnswerAnswer
AnswerAnswer
[Idep]AnswerAnswer
AnswerAnswer

Preparation of Adjusting Entries

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Preparation of Adjusting Entries

Bartow Photographic Services takes wedding and graduation photographs. At December 31, the end of Bartow’s accounting period, the following information is available:

All wedding photographs are paid for in advance, and all cash collected for them is credited to Unearned Service Revenue. Except for a year end adjusting entry, no other entries are made for service revenue from wedding photographs. During the year, Bartow received $42,600 for wedding photographs. At year end, $37,330 of the $42,600 had been earned. The beginning-of-the-year balance of Unearned Service Revenue was zero.

During December, Bartow photographed 223 members of the next year’s graduating class of Shaw High School. The school has asked Bartow to print one copy of a photograph of each student for the school files. Bartow delivers these photographs on December 28 and will bill the school $5.00 per student in January of next year. Revenue from photographs ordered by students will be recorded as the orders are received during the early months of next year.

Equipment used for developing and printing was rented for $22,500. The rental term was for 1 year beginning on August 1 and the entire year of rent was paid on August 1. The payment was debited to Prepaid Rent.

Depreciation on the firm’s building for the current year is $9,390.

Wages of $4,168 are owed but unpaid and unrecorded at December 31.

Supplies at the beginning of the year were $2,400. During the year, supplies costing $19,600 were purchased from Kodak. When the purchases were made, their cost was debited to Supplies. At year end, a physical inventory indicated that supplies costing $4,100 were on hand.

Required:

Hide1. Prepare the adjusting entries for each of these items.a.Dec. 31        (Record earned revenue)
Hideb.Dec. 31        (Record credit sales to customers)
Hidec.Dec. 31        (Record use of prepaid rent)
Hided.Dec. 31        (Record depreciation)
Hidee.Dec. 31        (Record wages owed to employees)
Hidef.Dec. 31        (Record use of supplies)

2. Conceptual Connection: By how much would net income be overstated or understated if the accountant failed to make the adjusting entries?
SelectOverstatedUnderstatedCorrect 1 of Item 7 by $

NPV, Make or Buy, MACRS, Basic Analysis

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NPV, Make or Buy, MACRS, Basic Analysis

2015 2016 2017 2018 2019 50,000 50,000 52,000 55,000 55.000

Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows:

The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of $945,000 with terms of 2/10, n/30; the company’s policy is to take all purchase discounts. The freight on the equipment would be $11,000, and installation costs would total $22,900. The equipment would be purchased in December 2014 and placed into service on January 1, 2015. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of $12,000 at the end of its economic life in 2019. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of $2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition.

hmcc03h_ch19_pr19-31%282%29.jpg

   The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of $1,500. Rather than replace the equipment, one of Jonfran’s production managers has suggested that the waste containers be purchased. One supplier has quoted a price of $27 per container. This price is $8 less than Jonfran’s current manufacturing cost, which is as follows:

Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at $45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment.

   Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate.

   You must use the Exhibit 19B.1 and Exhibit 19B.2 present value tables and Exhibit 19.5 to solve the following problems.

Required:

Hide1. Prepare a schedule of cash flows for the make alternative. Enter cash outflows as negative amounts and cash inflows as positive amounts. Round your answers to the nearest dollar when rounding is required.Jonfran CompanySchedule of Cash FlowsItemCFYear 2014Equipment$DiscountFreightInstallationSalvage-oldWorking capital reductionTotal$Year 2015Operating expenses$Depreciation tax shieldTotal$Year 2016Operating expenses$Depreciation tax shieldTotal$Year 2017Operating expenses$Depreciation tax shieldTotal$Year 2018Operating expenses$Depreciation tax shieldTotal$Year 2019Operating expenses$Salvage-newTotal$

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Prepare a separate analysis of operating expenses combining variable and fixed costs into total cash operating expenses. Then factor them into the analysis on an after tax basis. Don’t forget to factor in the cash flow from selling the assets in the beginning and end of the analysis.

Calculate the NPV of the make alternative. Round intermediate calculations and your final answer to the nearest dollar. If the NPV is negative, enter your answer as a negative value.

$

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NPV is the present value of all the cash flows for the project. Remember the up front project cost is at time zero so it doesn’t need to be adjusted by a discount factor to present value.

Hide2. Prepare a schedule of cash flows for the buy alternative. Enter cash outflows as negative amounts and cash inflows as positive amounts.Jonfran CompanySchedule of Cash FlowsItemCFYear 2014Salvage-old$Year 2015Purchase costYear 2016Purchase cost:Year 2017Purchase cost:Year 2018Purchase cost:Year 2019Purchase cost: