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"The following represents the financial position of Grass Roots Inc. at the end of 2009.
Grass Roots Inc.
Balance Sheet
December 31, 2009
Cash $ 600,000
Accounts receivable (Net of allowance account,$10,000) 600,000
Prepaid Insurance 60,000 Inventory 800,000
Equipment (Net of Accum. Depreciation, $200,000) 1,000,000
Total Assets $3,060,000
Long Term Note 400,000
Accounts payable 780,000
Unearned Service Revenue 120,000
Common stock 1,000,000
Retained earnings 760,000
Total Liabilities and Stockholders’ Equity $3,060,000
Three kinds of events took place in 2010: Operations, Capital Purchases and Capital Dispositions.
Operations
A. The following summarize operations for 2010. Prepare journal entries for each numerical item.
1. Sales totaled $8,000,000. All sales are on credit with discounts offered for quick payment. The company records sales using the gross method.
2. Cash collected from customers totaled $6,800,000. The customers took discounts in the amount of $70,000.
3. Inventory purchased on account during the year totaled $5,500,000
4. Payments to vendors for credit purchases totaled $2,300,000. Grass Roots did not pay within discount terms.
5. Bad debts were written off in 2010 totaling $30,000.
6. Additional operating expenses in 2010 were as follows: Salaries-$800,000, Advertising- $250,000, Rent-$800,000, Income Taxes $200,000.
B. The following represent adjusting entries that need to be made in 2010.
1. The company uses LIFO for its only inventory item. The reported inventory of $800,000 at December 31, 2009, consisted of two layers: 2,000 units costing $200 each and 1,600 units costing $250 each. The $5,500,000 purchases of inventory in 2010 consisted of these two purchases, in order of occurrence: 10,000 units costing $260 each and 10,000 units costing $290 each. At the end of 2010, 6,000 units remained as ending inventory. Prepare the adjusting entry for Cost of goods sold.
2. Accrued interest on the Long Term note from the 2009 Balance sheet is $21,000.
3. Insurance has expired in the amount of $30,000.
4. Grass Roots also services equipment on a yearly contract basis. $40,000 of the Unearned Service Revenue account has been earned.
5. Based on an analysis of Accounts receivable, it is estimated that 1% of the 2010 Accounts receivable balance will result in bad debts for 2011.
6. Depreciation on all equipment is calculated at the rate of 10% per year. Depreciation on Equipment purchased or sold during the year is calculated for partial years using months.
(Handle purchases and acquisitions before making this adjustment.)
Capital Purchases
On January 1, 2010, the company purchased machinery by paying $100,000 down and signing a note to pay $400,000 in three years on January 1, 2010. The effective interest rate for the note is 7%. The machinery is estimated to have a 10-year life and no salvage value. Round amounts in ways that make sense.
P1. Determine the present value of the note and the purchase price of the equipment.
P2. Complete the following amortization schedule for the note.
Amortized Note Carrying
Date Interest Expense Discount Amount
________________________________________
01/01/10
12/31/11
12/31/12
12/31/13
P3. Journalize the acquisition on January 2, 2010, and the adjusting entries on December 31,
2010, to accrue interest and to record depreciation.
Capital Dispositions
On June 30, 2010, the company sold $600,000 of its equipment appearing on the December 31, 2009 balance sheet for a price of $500,000. The accumulated depreciation related to this equipment through December 2009 is $100,000. The buyer paid $100,000 down and signed a two-year, 6% note with Grass Roots for the remainder. To satisfy the note, the buyer will make four equal semiannual loan payments each December 31st and June 30th of $107,614.
D1. Determine the gain or loss (if any) on the sale. Be sure to bring depreciation up to date to the sale date prior to this calculation.
D4. Prepare entries required for Grass Roots on June 30 for depreciation and the sale as well as the first payment received on December 31, 2010.
Financial Statements
Based solely upon the December 31, 2009 balance sheet and the events described in this problem:
F1. Prepare a 2010 Single Step Income Statement.
F2. Prepare a December 31, 2010 Classified Balance Sheet.
F3. Prepare a Statement of Cash flows using the Direct method.
"
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"The following represents the financial position of Grass Roots Inc. at the end of 2009.
Grass Roots Inc.
Balance Sheet
December 31, 2009
Cash $ 600,000
Accounts receivable (Net of allowance account,$10,000) 600,000
Prepaid Insurance 60,000 Inventory 800,000
Equipment (Net of Accum. Depreciation, $200,000) 1,000,000
Total Assets $3,060,000
Long Term Note 400,000
Accounts payable 780,000
Unearned Service Revenue 120,000
Common stock 1,000,000
Retained earnings 760,000
Total Liabilities and Stockholders’ Equity $3,060,000
Three kinds of events took place in 2010: Operations, Capital Purchases and Capital Dispositions.
Operations
A. The following summarize operations for 2010. Prepare journal entries for each numerical item.
1. Sales totaled $8,000,000. All sales are on credit with discounts offered for quick payment. The company records sales using the gross method.
2. Cash collected from customers totaled $6,800,000. The customers took discounts in the amount of $70,000.
3. Inventory purchased on account during the year totaled $5,500,000
4. Payments to vendors for credit purchases totaled $2,300,000. Grass Roots did not pay within discount terms.
5. Bad debts were written off in 2010 totaling $30,000.
6. Additional operating expenses in 2010 were as follows: Salaries-$800,000, Advertising- $250,000, Rent-$800,000, Income Taxes $200,000.
B. The following represent adjusting entries that need to be made in 2010.
1. The company uses LIFO for its only inventory item. The reported inventory of $800,000 at December 31, 2009, consisted of two layers: 2,000 units costing $200 each and 1,600 units costing $250 each. The $5,500,000 purchases of inventory in 2010 consisted of these two purchases, in order of occurrence: 10,000 units costing $260 each and 10,000 units costing $290 each. At the end of 2010, 6,000 units remained as ending inventory. Prepare the adjusting entry for Cost of goods sold.
2. Accrued interest on the Long Term note from the 2009 Balance sheet is $21,000.
3. Insurance has expired in the amount of $30,000.
4. Grass Roots also services equipment on a yearly contract basis. $40,000 of the Unearned Service Revenue account has been earned.
5. Based on an analysis of Accounts receivable, it is estimated that 1% of the 2010 Accounts receivable balance will result in bad debts for 2011.
6. Depreciation on all equipment is calculated at the rate of 10% per year. Depreciation on Equipment purchased or sold during the year is calculated for partial years using months.
(Handle purchases and acquisitions before making this adjustment.)
Capital Purchases
On January 1, 2010, the company purchased machinery by paying $100,000 down and signing a note to pay $400,000 in three years on January 1, 2010. The effective interest rate for the note is 7%. The machinery is estimated to have a 10-year life and no salvage value. Round amounts in ways that make sense.
P1. Determine the present value of the note and the purchase price of the equipment.
P2. Complete the following amortization schedule for the note.
Amortized Note Carrying
Date Interest Expense Discount Amount
________________________________________
01/01/10
12/31/11
12/31/12
12/31/13
P3. Journalize the acquisition on January 2, 2010, and the adjusting entries on December 31,
2010, to accrue interest and to record depreciation.
Capital Dispositions
On June 30, 2010, the company sold $600,000 of its equipment appearing on the December 31, 2009 balance sheet for a price of $500,000. The accumulated depreciation related to this equipment through December 2009 is $100,000. The buyer paid $100,000 down and signed a two-year, 6% note with Grass Roots for the remainder. To satisfy the note, the buyer will make four equal semiannual loan payments each December 31st and June 30th of $107,614.
D1. Determine the gain or loss (if any) on the sale. Be sure to bring depreciation up to date to the sale date prior to this calculation.
D4. Prepare entries required for Grass Roots on June 30 for depreciation and the sale as well as the first payment received on December 31, 2010.
Financial Statements
Based solely upon the December 31, 2009 balance sheet and the events described in this problem:
F1. Prepare a 2010 Single Step Income Statement.
F2. Prepare a December 31, 2010 Classified Balance Sheet.
F3. Prepare a Statement of Cash flows using the Direct method.
"
- Sent to Accounting Expert Tutor on 2/27/2011 at 11:23am
The Expert Tutor on Course Hero answered:
We need you to clarify your question for our tutors!
Clarification request: Dear Student,
I tried looking into your assignment, but later I found, I am unable to work on your question presently.
I apologize for the inconvenience caused to you and would request you to feel free to get back to me in future for help required on more different questions.
Please note that you will not be charged for this question.
Regards
A
Dear Student,
I tried looking into your assignment, but later I found, I am unable to work on your question presently.
I...
I tried looking into your assignment, but later I found, I am unable to work on your question presently.
I...