2016 Info: On January 1, we are authorized to issue 100,000 shares of our 1.00 common stock. We...

60.1K

Verified Solution

Question

Accounting

2016 Info:
On January 1, we are authorized to issue 100,000 shares of our1.00 common stock.  We issued 50,000 shares for$80/share; and issued a $100,000 bond for either 1) $96,000 or 2)104,000.  The market rate was 9% and the stated rate was10%.  The bond is a 10 year bond that pays interest on1/1 of each year.
Inventory includes the following:  Beginning balanceof $0.  On January 3 we purchased  $22,000(1000 units at $22) worth of inventory.  1,000 units ofinventory was purchased on June 1 for $23/unit; and finally a 1,000units on December 1 for $24/unit.  2,000 units were soldfor $300/unit on December 20^th($120,000 in cash wasreceived and the remaining will be collected in 2017). The rateused for determining uncollectible has been set at 10% of grosscredit sales. The company uses perpetual FIFO.
Equipment1 was purchased at the beginning of the year for$50,000 cash.  No salvage/residualvalue.  Straight-line depreciation is used over a 10-yearlife.  Equipment2 was also purchased at the beginning ofthe year for 550,000 (no salvage) 10 year life.  Wedecided to use SL method.  The equipment2 required a$5,000 repair by year-end.  Equipment3 was purchased on6/1 for 100,000 (20,000 salvage value). We decided to use SYD as adepreciation method.  At 12/31 it required a capitalimprovements of $40,000 which we signed a note to pay in 9months.
Equipment1 was purchased at the beginning of the year for$50,000 cash.  No salvage/residualvalue.  Straight-line depreciation is used over a 10-yearlife.  Equipment2 was also purchased at the beginning ofthe year for 550,000 (no salvage) 10 year life.  Wedecided to use SL method.  The equipment2 required a$5,000 repair by year-end.  Equipment3 was purchased on6/1 for 100,000 (20,000 salvage value). We decided to use SYD as adepreciation method.  At 12/31 it required a capitalimprovements of $40,000 which we signed a note to pay in 9months.
Building was purchased on 4/1 for $900,000cash.  Salvage/residual value of $100,000exists.  Straight-line is used over a 20-year life.
We needed funds, so we signed a note on 7/1 for$100,000.  We agreed to pay back the note at the end ofthe next year.  Interest rate is10%, payable12/31.  The note is short-term.
On 10/1 we started to create a patent.  Costs ofsalaries related to the creation of the patent were $50,000 ($5,000of this remained unpaid by year-end).  This patent has anexpected life of 10 years. We purchased a second patent for $80,000with an expected live of 8 years.
On 6/30 we issued another 25,000 shares of our stock for$70/share.
On 10/1 we sold equipment1 (that was purchased at the beginningof the year).  At the time of the sale, the asset was onthe books at a historical cost of $50,000.   We soldit for $40,000 (we received cash).
On 11/1 we purchased $100,000 of equity of anothercompany.  It paid us $2,000 in dividends byyear-end.
Dividends paid during the year were $79,500. The equity of theother company was worth $60,000 at year-end 2016.  Thetax rate is 21%
--> Please prepare journal entries.

Answer & Explanation Solved by verified expert

3.6 Ratings (335 Votes)

Date Account Titles Debit Credit 2016 Jan 1 Cash 4000000 Common Stock 50000 Paidin Capital in Excess of Par Common Stock 3950000 Jan 1 Cash 104000 Premium on Bonds Payable 4000 Bonds Payable 100000 Jan 1 Equipment 1 50000 Cash 50000 Jan 1 Equipment 2 550000 Cash 550000 Jan 3 Inventory 22000 Cash 22000 Apr 1 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

2016 Info:On January 1, we are authorized to issue 100,000 shares of our1.00 common stock. We issued 50,000 shares for$80/share; and issued a $100,000 bond for either 1) $96,000 or 2)104,000. The market rate was 9% and the stated rate was10%. The bond is a 10 year bond that pays interest on1/1 of each year. Inventory includes the following: Beginning balanceof $0. On January 3 we purchased $22,000(1000 units at $22) worth of inventory. 1,000 units ofinventory was purchased on June 1 for $23/unit; and finally a 1,000units on December 1 for $24/unit. 2,000 units were soldfor $300/unit on December 20th($120,000 in cash wasreceived and the remaining will be collected in 2017). The rateused for determining uncollectible has been set at 10% of grosscredit sales. The company uses perpetual FIFO.Equipment1 was purchased at the beginning of the year for$50,000 cash. No salvage/residualvalue. Straight-line depreciation is used over a 10-yearlife. Equipment2 was also purchased at the beginning ofthe year for 550,000 (no salvage) 10 year life. Wedecided to use SL method. The equipment2 required a$5,000 repair by year-end. Equipment3 was purchased on6/1 for 100,000 (20,000 salvage value). We decided to use SYD as adepreciation method. At 12/31 it required a capitalimprovements of $40,000 which we signed a note to pay in 9months. Equipment1 was purchased at the beginning of the year for$50,000 cash. No salvage/residualvalue. Straight-line depreciation is used over a 10-yearlife. Equipment2 was also purchased at the beginning ofthe year for 550,000 (no salvage) 10 year life. Wedecided to use SL method. The equipment2 required a$5,000 repair by year-end. Equipment3 was purchased on6/1 for 100,000 (20,000 salvage value). We decided to use SYD as adepreciation method. At 12/31 it required a capitalimprovements of $40,000 which we signed a note to pay in 9months. Building was purchased on 4/1 for $900,000cash. Salvage/residual value of $100,000exists. Straight-line is used over a 20-year life.We needed funds, so we signed a note on 7/1 for$100,000. We agreed to pay back the note at the end ofthe next year. Interest rate is10%, payable12/31. The note is short-term.On 10/1 we started to create a patent. Costs ofsalaries related to the creation of the patent were $50,000 ($5,000of this remained unpaid by year-end). This patent has anexpected life of 10 years. We purchased a second patent for $80,000with an expected live of 8 years. On 6/30 we issued another 25,000 shares of our stock for$70/share.On 10/1 we sold equipment1 (that was purchased at the beginningof the year). At the time of the sale, the asset was onthe books at a historical cost of $50,000. We soldit for $40,000 (we received cash).On 11/1 we purchased $100,000 of equity of anothercompany. It paid us $2,000 in dividends byyear-end. Dividends paid during the year were $79,500. The equity of theother company was worth $60,000 at year-end 2016. Thetax rate is 21%--> Please prepare journal entries.