exam1 winter04 bus322 - /7 r ‘ NAME—e” BUS 322...

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Unformatted text preview: {/7 r/ ‘ NAME—e” . BUS 322., Intermediate Accounting 11 Exam 1 —-— Winter 2.004 Question 1 (100 points) This question involves situations that are independent from each other. For each situation, you should complete the partial Statement of Cash Flows for the X Company and complete other indicated tasks. T-Account templates are provided to help you with your solution. You Wlll not be asked to submit the T-Accounts. Sub-question A. On January 1, 2003, X Company acquired manufacturim equipment at a price of $200,000. Miller made a down payment of $50,000 and issued irate payable for $150,000. The principal amount of the note is payable on December 31, 2004. Simple interest is payable annually on December 31. The payment that was due on December 31, 2003, was made by X Company. The equipment is being depreciated by the straight-line method over 10 y ars with a Zero estimated salvage value. The market rate of interest on January 1, 2003, was Complete the following partial Statement of Cash Flows for the Year Ended December 31, 2003. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Oper t' t' ' ' : 1' AddsaL—s.m“‘tgzi3;ss s 4 Dcpvcaaruw \ Exp 261090 4 Cash $Wd¢5 but wrist} OackNfiVC; a ($1, 8003 Cash Flows from Investing activities: . L/ WWW 04' Hahlkfuchfl'llfla EELKMD LAT-30'“; '> Um Dwmdcd we; 1,3. dimer Rum We; 3 LCE‘JJO“) Cash Flows from Financing activities: DC (Affair. tn LCL&V\ @4331 38$ {4.) Nanfixm ”' ‘ . . ., .1 - ~ - M '- m WW” Website 4 EQSKACKYIM O-F WET-(WWW {.569 turn: gyuiiomg $ L \50 00 (55 _ 1 H ' Vw “5,1,3; {3){3 t’vxijarwfe’ 5.1m} all”. 3); Cglw‘p ‘_7//2\ / \ ‘- . [— 3 Complete the lonuw'ing pared December 31. 2003, Balance Sheet. W ‘- the discount amounts. 1' X Company Partial Balance Sheet December 31, 2003 Current liabilities: ‘ 31‘ 9'5 5 2% me WC . «x . ‘ J Lon -term liabilities: ,_ a" / /. 1gp L‘T mart Wain 3W 0‘ m“) \ qo‘qli 1 of B tl 17.5% x‘ 4. Complete the following partial Statement of Cash Flows for the Year Ended December 31, 2003. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: /-<:"‘\ i Near :2“th '- 0033 l 9 ”“0 I Add 2 7/“ t >‘CXX 'fl " u ’ 95% 7- ”“ ““9 Cash Flows from Investing activities: ‘ S \ OD, { 5 Cash used to Warner“ Manet Exp» ’ C ) OAS" “31¢ 90V anvxq at dew mes Cash Flows from Financing activities: DQV‘COUSC m £0ng We e" MWWMW m m “Wwaummv a... .n m." EDSWG. Cy? 170 Nb few ‘Wflqfia 66 WW Sub-question C. The following balances were obtained from the books of X Company. Selected Balance Sheet Amounts December 31 2003 2002 Dr. (Cr) Dr. (CL! Accounts receivable $ 200,000 S 170,000 Allowance for bad debts (2,000) (1,700) Merchandise inventory 100,000 120,000 Accounts payable (50,000) (70,000) Notes: All Accounts receivable arise from sales to customers on account. All Accounts payable arise from purchases of merchandise inventory on account. X Company Selected Income Statement Amounts Year Ended December 31, 2003 Sales revenue $ 2,000,000 Cost of goods sold 1,000,000 Gross margin 1,000,000 Expenses: Bad debt expense 2,100 Complete the following partial Statement of Cash Flows for the Year Ended December 31, 2003. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: p! M? 37-33%" OFT-l. QCO M = _ A W“. A\\ULL) (b. ED 1500 Lt . AM Hm. 13w. “Emcee ’1‘ Wduiu hot 95,100 13‘“ A IR ( aomfi Li D \h A IP L20)w0 LIL QOLSW used U35 Upwajlt 1,433 Chan-am 53 fl 9684300 Sub-question D. On January 1, 2003, X Company issued $1,000,000 face amount of 7% bonds payable at a market (yield) rate of 6%. Coupons on the bonds are payable annually on December 31 until December 31, 2012. On December 31, 2003, X Company made the first coupon payment on the 7% bonds. 2. Complete the following partial Statement of Cash Flows for the Year Ended December 31, 2003. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: Nujncuw'xc. (“195-3 3 (WN‘W’) { begswmw eta-emf 4 robh (3%)“de N 09“ “Kiwi it‘ll-(«’3 H Liloiuu-D Cash Flows from Investing activities: Cash Flows from Financing activities: , 1. r; (50] % WW, by (5W8 o? 1% 35%” l‘fl ‘ 33(3me \‘V‘\ {1 OLEQFN Sub-question E. On December 31, 2007, after the coupon payment that was due on that date, X Company retired the 7% bonds payable that were issued in Sub-question D above. X Company accomplished this retirement by purchasing the bonds in the market place. The market rate of interest on December 31, 2007, was 8%. 1. Complete the following time line and computations to determine the January 1, 2007, book balances for the 7% bonds payable. 0 1 2 5 6 I ---------------- I ---------------- I -------------------------- I ---------------- I g 1. v" DU" A, 1‘13 Lil) i“... I r _ . ?\I; l 2.. “-0 MOWJUUOW NT: ”7113 pix)": R” "I —— /5‘I “flag ,w £2. w am 2. Complete the following partial payment table for 2007. / / Principal '3 % Total Principal ; Period Balance Interest Pament Payment 7 2007 defame“? qg L432. 116.0(1) 2.! , 559: ,f 2008 %3,%% LIt, {1'04" 77’1”“) "7:5 .21 71> i 3. Complete the following time line and computations to determine the December 31, 2007, f i i l i. i l l l. market price of the 7% bonds payable. 0 1 2 4 5 I ---------------- I ---------------- I -------------------------- I ---------------- I A 90,34) A<eaa,ap AZ‘QSAW “"99““ _ 5 EV: \ ,ud/‘I 39” \p ' Computanons: \\\ 3. Complete the following partial Statement of Cash Flows for the Year Ended December 31, 2007. Don’t forget the interest expense for 2007. X Company Partial Statement of Cash Flows Year Ended December 31, 2007 Cash flows from Operating activities: NDk DNLUWLQ ( \0’537 KT; Cash Flows from Investing activities: Cash Flows from Financing activities: A Question 2 (50 points) Use the following T-accounts for the year ended December 31, 2003, to prepare the Statement of Cash Flows that appears on the following page. ASSETS Cash Bal 200.000 20.000 (3) (1) 200.000 60.000 (4) (2) 460.450 100.000 (7) (5) 50,000 3.150.000 (12) (0) 50.000 300.000 (13) (10) 5.300.000 300.000 (14) 11 556.900 3312893350 Accounts receivable Bal300.000 556.900 (11) 10 620.000 3.100 15 Bal360.000 X ‘8\ Allowance for bad debts 0L6) (15) 3,100 3.000 Bal \9 3.700 24 3.600 Bal 8% Note receivable (5) 50.000 "Y 000‘ Interest receivable 1‘.) (16) 333 4;: I Omar Su lies invento u 0:0 Bal 00.000 00.000 (22) l ‘t Bal 70.000 ‘20- Merehandiee invento 0C0 Bal 700.000 2.910.000 (25) QO 9 3.000.000 33! 790.000 Pre aid rent Pre aid insurance BaI 55.000 Land Ba180.000 80.000 5 BaI-0- Storefixtures Bal 300.000 75.000 (6) 7 300.000 Ba|525,000 Accum 00 rec—Store fixtures (6) 4.750 19.000 Bal 1.188 (23a) 1.553 230 17.021 Bal LIABILITIES 10.000 BaI 10.000 19 700.000 Bal 70.000 (8) 3.000,000 9 2.917 (10) 8% Note a able 200.000 (7) 7% Bonds a able 500,000 (2) (Jr UHWI’B Discount on 7% Bonds ca able Bal 33.357 x .531 2.771 STOCKHOLDERS' EQUITY Cost of Goods Sold (25) 2.910.000 (13) 250.000 19 10.000 Bal 200.000 Rent ex nse (20) 20.000 Insurance ex nse (21) 5.000 (22) 60,000 De reciation ex nse (23a)1.168 23b 1.503 Bad debt ex use (24) 3.700 Loss on sale of store fixtures (6) 20.250 Interest ex ense (17) 1.333 (18) 3.110 Dividends (14) 300.000 l Common stock. $1 ar 70.000 Bal Additional aid-inca ital 550.000 Bal 730.000 Bal Retained Eamin s 306.000 BaI Sales Revenue 5.920.000 (10) Interest income 333 (16) Tyke 2(01‘31‘501— Z Company Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: Net income 1 [fl 7. Add: ‘ mason‘W-OVW 20,150 ’5 p m Aximmeb Loo? ’ ,, D m 1m. pug Nb”??? ’ % L> iY\ {Wyatt 2‘6“? f .7 5 ; mfg, ZSOLN A if“ DDwLm 4,10%? 7 SU memA 7— ' “’55 ’6‘” Deduct: A7 {57mm (yaw a; warm); L20 OLA A m A (2 (WOW f‘W 3) 11> Wx XX“? QCC / _ LL {(3 036-00- IVWV- lepilb> "1} 1:; an MW» LVN {Ct M‘JWY. A km the/Dd 33mg U38. an)? A av": N L. .- kHDJW I L‘s xvi Agata: W3, "k.._)_..___.._d"o\/ M ngn pwmdcd but op€MUmOj m mi it “it“; “F 775232233 Cash Flows from Investing activities: Cam prov, WC. c3! tavnfl ‘30) 000 Q 506:)“ pm. We 04: SF: ‘50}oaM («CerVfl .1ny w;- {J tight”? 23‘: M) CA5“ me‘ kl'j MWSTWES altat‘ynu'rb Cash Flows from Financing activities: Q CASH prov Mrw ifswumofi WWW 33ka K 20(5ch ELLEN (Drovtdcd. flown E5$MU~Lt 04: 70(0 ESP ” QM, U50 (,4 M Na 33,25,550 in D!€>WJ’WL‘ i.) Wm} in pan} be“ ages (30'); £1.53) Cwa’tm «Citnmnums - v .. -. . ovals; 8 am‘umc ' {.51 4‘ V“ fiaamk 3:me \lvo'b 0% L39" ‘iEchi DJfi ""0" NMQXSH FYKUJ/mhg iv ikf‘ “V“: Ni“? Twang ogévx WrSP tam-two M2 :32 9 BUS 322, Intermediate Accounting 11 Solution to Exam 1 Question 1 Sub-question A. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: Net loss Add: Depreciation expense Cash used for operating activities Cash Flows from Investing activities: Cash used to acquire manufacturing equipment Decrease in cash Noncash investing and financing activities: Note payable issued for purchase of manufacturing equipment Sub-question B. Part 1 a. Time line and computations to determine the annual payments. P = 150,000 = ? A= ? b. Computations. A = $300,000(A/P,3,2%) $ (29,000) 20,000 (9,000) 150,000) § $59,000! $ 150,000 = $104,026 c. Time line and computations to determine the January 1, 2003, n_et book value of the note payable. 0 1 2 l -------------------------------- l -------------------------------- x ------------ =? 104,026 104,026 d. Computations. P = $104,026(P/A,3,6%) = $278,063 P 2 2% table Principal 2% Total Period Balance Interest Pam ent 2003 300,000 6,000 104,026 2004 201,974 4,039 104,026 2005 101,987 620313—16. Principal 6% Total Period Balance Interest Pament 2003 278,063 16,684 104,026 2004 190,721 11,443 104,026 2005 98,13 8 Part 3 X Company Partial Balance Sheet December 31, 2003 Current liabilities: Current maturities on 2% note payable, less discount of $7,404 Long-term liabilities: 2% Note payable, less current maturities of $92,583 and discount of $3,849 Principal Mali 98,026 99,987 Principal Pament 87,342 92,583 $ 92,583 $ 98,138 X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: Net loss ($16,684 + $37,806) Add: Depreciation expense Cash used for operating activities Cash Flows from Investing activities: Cash used to acquire manufacturing equipment Cash Flows from Financing activities: Cash used to reduce principle of note payable, net of related discount of $10,684 Decrease in cash Noncash investing and financing activities: Note payable issued for purchase of manufacturing equipment, net of related discount of $21,937 Sub—question C. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows from Operating activities: Net income Add: Change in Allowance for bad debts $ 300 Change in Merchandise inventory 20,000 Deduct: Change in Accounts receivable $ 30,000 Change in Accounts payable 20,000 Cash provided by operating activities $ (54,490) w (16,684) (100,000) {87,342} i $204,026! 8 278,063 $ 997,900 20,300 50 000 m Sub-question D. X Company Partial Statement of Cash Flows Year Ended December 31, 2003 Cash flows fi-om Operating activities: Net loss $ (64,416) Deduct: Change in Premium on 7% Bonds payable account 5,584 Cash used for operating activities (70,000) Cash Flows from Financing activities: Cash provided from issuance of 7% bonds payable, inclusive of $73,601 premium 1,073,601 Increase in cash $ 1,003,601 Sub-question E. Part 1 0 1 2 5 6 I ---------------- I ---------------- I -------------------------- I ---------------- I 70,000 70,000 70,000 70,000 1,000,000 Computations: P = $70,000fP/A,6,6%) + $1,000,000(P/F,6,6%) = $1,049,173 P 2 Principal 6% Total Principal Period Balance Interest Pam ent Pament 2007 1,049,173 62,950 70,000 7,050 2008 1,042,123 P 3 0 1 2 4 5 I ---------------- I ---------------- I -------------------------- I ---------------- I 70,000 70,000 70,000 70,000 1,000,000 Computations: P = $70,000(PI’A,5,8%) + $1,000,000(P/F,5,8%) = $960,073 X Company Partial Statement of Cash Flows Year Ended December 31, 2007 Cash flows from Operating activities: Net income ($82,050 - $62,950) $ 19,100 Deduct: Gain on retirement of debt $ 82,050 Change in Premium on 7% Bonds payable account 7,050 (89,100! Cash used for operating activities (70,000) Cash flows fiom Financing activities: Cash used to retire 7% Bonds payable 1960,0731 Decrease in cash § £120303073! Question 2 Z Company Statement of Cash Flows Month Ended January 31, 2003 Cash Flows From Operating Activities: Net income 8 2,624,169 Add: Depreciation expense $ 2,771 Loss on sale of store fixtures 20,250 Change in Allowance for bad debts 600 Change in Interest payable 1,333 Change in Coupons payable 2,917 Change in Discount on 7% Bonds payable 193 28,064 Deduct: Gain on sale of land 20,000 Change in Accounts receivable 60,000 Change in Interest receivable 333 Change in Supplies inventory 10,000 Change in Merchandise inventory 90,000 Change in Prepaid insurance 55,000 Change in Wages payable 10,000 Change in Accounts payable 80,000 (325,333) Cash provided by operating activities 2,326,900 Cash Flows From Investing Activities: Cash provided by sale of land 50,000 Cash provided by sale of store fixtures 50,000 Cash used to acquire store fixtures [ 100,000) Cash provided by investing activities -0- Cash Flows From Financing Activities: Cash provided from issuance of common stock 200,000 Cash provided from issuance of bonds payable 466,450 Cash used to pay dividends (300,000) Cash provided by financing activities 366,450 Increase in cash 3 2,693,350 Cash balance, January 1, 2003 200,000 Cash balance, January 31, 2003 $ 2,893,350 Noncash investing and financing activities Receipt of 8% Note receivable from sale of land 8 50,000 Issuance of 8% Note payable for purchase of Store fixtures (200,000) BUS 322 — Intermediate Accounting II Exam 1 - T-Account Templates for Question 1 Sub-question A OWNERS' EQUITY + ASSETS LIABILITIES Cash 5% Note a able Retained Earnin 3 50,000 (1) 150.000 (1) 9,000 (2) Interest ex ense (2)9,000 Manuracturin ui ment (1)200,000 De reciation ex ense (3) 20,000 Accum de rec-Mf e ui 20.000(3) Sub-question B ASSETS = LIABILITIES + OWNERS' EQUITY Cash 2% Note an able Retained Earnin s 100.000 (1) (2) 93,025 300,000 (1) 104.026 (2) Disc on 2% Note a abie (1) 21.937 10.684 (2) Interest ex ense (2) 16,684 De reciation ex ense (3) 37,806 37,806 (3) Sub-question C — This analysis is not needed to complete the Statement of Cash Flows ASSETS = LIABILITIES + OWNERS' EQUITY Accounts 3 able Retained Earntn s (7) 1,000,000 70,000 Beg 980,000 6 Cost of code sold 50,000 End (2) 1,000,000 (5) 1,958,200 1,000,000 (7) Sales revenue 2,000,000 ( Accounts receivable Beg 170,000 1,800 (4) (1) 2,000,000 1,968,200 5) End 200,000 Allow for bad debts (4) 1,800 1,700 Beg 2,100 3 2,000 End Bad debt ex ense (3) 2,100 Merchandise invento Beg 120,000 1,000,000 (2) 6 930,000 End 100,000 Sub-question D LIABILITIES + OWNERS' EQUITY ASSETS 7% Bonds a able Retained Earnin s 1,000,000 (1 ) Cash (1) 1,073,601 { 70,000 (2) Interest ex ense (2) 64.416 Prem on 7% Bonds a (2) 5.584 73,601 (1) Sub-question E ASSETS = LIABILITIES + OWNERS‘ EQUITY 7% Bonds 3 able Retained Earnin s (2) 1,000,000 1,000,000 Bal Cash 70,000 (1) 960,073 (2) Gain on retire of debt 32,050 (2) Interest ex ense (1) 62.950 Prem on 7% Bonds a (1) 7,050 49,173 Bal (2) 42,123 ...
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