ACC 2101-Extra credit problem Heights Community Center Page 1 The Heights Community Center ("HCC") recently completed its first year of operations. The Center provides space to local groups for various purposes: community theater rehearsals, choral group rehearsals, band and orchestra rehearsals, dance classes, play readings, book group meetings lectures, neighborhood group meetings, etc. The HCC rented temporary space in a local school at a monthly cost of post-closing trial balance for the Heights Community Center as of December 31, 20x1 appears below: $1,500 During 20x2 the HCC plans to purchase its own building. The Heights Community Center Post-closing Trial Balance December 31, 20x1 $ 27,650 14 2,100 2,210 650 350 15,000 Cash Interest Receivable Notes Receivable "1" Prepaid Insurance Community Center supplies Office supplies Theater equipment (sound and lighting) Accumulated depreciation- theater equipment Office Furniture Accumulated depreciation- office furniture Computers Accumulated depreciation-computers Accounts payable Unearned short-term rental revenue Unearned long-term rental revenue Notes payable "A" Discount on notes payable "A" Common Stock (shares outstanding) Retained Earnings 1,833 2,232 134 2,160 627 1,456 5,800 13,200 1,600 69 15,000 12,784 1,500 S 52,434 $ 52,434 TOTAL Company policies: No reversing entries are used. All numbers are rounded to the nearest ollar. The straight-line method of depreciation is used for all fkxed assets. All depreciation is calculated to the nearest month. Rental revenue accounts are initially credited when cash is received for all rentals of that are still unearned. The Center prepares adjusting entries and financial statements once a year, on December 31st ACC 2101-Extra credit problem Additional information regarding items on the 12/31/x1 post-closing trial balance: 1) A four-month note receivable (note receivable "1") was initiated on December 1, 20x1 for: appropriate for this type of note. The full principal and interest is due on April 1, 20x2. 2) A three-year liability insurance policy was purchased on March 1, 20x1 for: Page 3 2,100 8% was the stated interest rate on the note and it was considered 3) The theater equipment was acquired on February 1, 20x1 for a cash payment of: The life of the theater equipment is estimated to be (number of years): The residual value (as a percentage of original cost) is estimated at: $ 3,060 15,000 20% 4) The office furniture was acquired on January 1, 20x1. Terms of purchase were as follows: Five additional payments due semi-annually, starting on 7/1/x1 (continuing with 1/1/x2, 7/1/x2, 1/1/x3 and 7/1/x3) were accepted as zero-interest bearing notes. date of first payment: 1/1/x1 Amount of first payment $ 400 The semi-annual payment is: 400 The appropriate annual interest rate in the circumstances was determined to be: 6% The note payable described above is referred to as Note Payable "A".] The life of the office furniture is estimated to be (number of years): The residual value (as a percentage of original cost) is estimated at: 15 10% 5) Computers were purchased on February 1, 20x1 for a cash payment of: The life of the computers is estimated to be (number of years): $ 2,160 The residual value (as a percentage of original cost) is estimated at 5% 6) The HCC rents space in several different ways. Certain groups rent space on a regular basis (e.g, twice a week for six months [long-term rentals]): certain groups rent space for a shorter duration (e.g, once a week for one month [short-term rentals]); and some rent space as needed [daily rentals]. Adjustments were made on 12/31/x1 to reflect the amounts of unearned rental revenues. The balances appear on the post-closing trial balance above. ACC 2101-Extra credit problem Page 4 1) On May 1, 20x2, the HCC purchased a vacant building which had been used for a short period of time as a dance studio and small performance space RercentageTotal cost: Land Building Heating/Air conditioning equipment Old theater equipment 10% 65% 20% 5% Terms of purchase: A cash down payment was paid on May 1, 20x2: A 30-year, 5% mortgage was arranged for the remaining amount: $ 48,000 352,000 DEPRECIATION was determined as follows BUILDING 30 Estimated life (in number of years) (Note: Depreciation will begin as of July 1,20x2-after renovation.) The residual value (as a percentage of original cost) is estimated at 15% HEATING AND A/C EQUIPMENT: Estimated life (in number of years- Depreciation to begin 5/1/x2) The residual value (as a percentage of original cost) is estimated at 10 0% OLD THEATER The old theater equipment is going to be sold and replaced and is, therefore, EQUIPMENT: not being depreciated $8,160 2) A two-year fire insurance policy was purchased on May 1, 20x2 for: 3) Renovation of the building began immediately after the purchase date. The renovation took two months to complete and the building was ready for use as of July 1, 20x2. [The renovation cost will be capitalized and added to the cost of the building. The depreciation on the building will begin on July 1, 20x2, the date the building was placed into use. See note 1 above for depreciation policy related to the building) The renovation cost was fully financed through the sale of no-par common stock. 3,500 Total renovation cost: $ 70,000 Number of shares issued: 4) The existing (old) theater equipment (e-g. amount purchased on February 1, 20x1 plus amount acquired on May 1, 20x2 with purchase of vacant building) was sold on July 1, 202 A note receivable was accepted in exchange for the old theater equipment (referred to as "Note Receivable "2") 35,000 Maturity value of note: Term of note (in number of years): Stated annual interest rate: Annual interest rate considered appropriate in circumstances 2% 5% ACC 2101-Extra credit problem Page 5 Specific transactions during 20x2: (continued) 5) New theater equipment was purchased on July 1, 20x2. Terms of purchase: An initial cash payment plus a non-interest bearing note payable (referred to as "Note Payable "B") were issued in exchange for the new theater equipment Initial cash payment: Maturity value of non-interest bearing note: Term of note (in number of years): Annual interest rate considered appropriate in circumstances: $ 10,000 125,000 7% DEPRECIATION of new theater equipment: Estimated life (in number of years) The residual value (as a percentage of original cost) is estimated at: 20% 6) New community center equipment was purchased on September 1, 20x2, for cash: $ 25,000 DEPRECIATION of community center equipment: Estimated life (in number of years) The residual value (as a percentage of original cost) is estimated at: 12% 7) Dividends were declared and paid on December 15, 20x2. Amount per share:$0.25 8) A mortgage payment was made on December 31, 20x2 for the period May 1, 20x2 through December 31, 20x2. Total payment: Amount applied to principal (e.g, mortgage payable account): Amount applied to mortgage interest expense: $ 15,266 3,533 $11,733 Summary transactions during 20x2; [Note: These transactions occur throughout the year, but are presented as summaries so that only one entry will have to be prepared for each of the summary transactions. Some of these transactions will be recorded at December 31, 20x2.] 1) All accounts payable outstanding at the end of 20x1 were paid in January 20x2. 2) Rental Revenue Information: a) All short-term unearned rental revenue amounts as of 12/31/x1 were earned in the first few months of 20x2. All long-term unearned rental revenue amounts as of 12/31/x1 were earned throughout 20x2. b) Cash received for long-term rental revenues during 20x2 amounted to: It was determined that the amount of long-term rentals unearned at 12/31/x2 was: c) Cash received for short-term rental revenues during 20x2 amounted to: it was determined that the amount of short-term rentals unearned at 12/31/x2 was: d) Cash received for daily rental revenues during 20x2 amounted to: 240,000 $ 28,800 $ 78,000 $ 1,450 $ 46,300 ACC 2101-Extra credit problem Page 6 3) It was determined that two clients who had arranged for long-term rentals were unable to make a few of their normal monthly payments during 20x2, but both had promised that full payments would be made during January 20x3. The amounts expected are: 4,200 (The HCC will be recording these amounts as accounts receivable at 12/31/x2.) 4) Total operating expenses (e-g, salaries, utilities, maintenance, advertising, etc.) incurred for the year ended 12/31/x2 were: paid in cash: $ 77,847 amount still owed: 14,828 92,675 5) All administrative expenses (e g., salaries, rent, utilities, etc.) incurred for the year ended 12/31/x2 were: paid in cash: 68,464 9,336 77,800 amount still owed: $ 2,340 $ 730 6) Additional community center supplies purchased during the year for cash: community center supplies on hand at year-end: $ 1,385 $ 525 7) Additional office supplies purchased during the year for cash: office supplies on hand at year-end: 8) The percentage of estimated uncollectible accounts receivable at the end of December, 20x2 is determined to be: 20% ACC 2101-Extra credit problem Heights Community Center Page 1 The Heights Community Center ("HCC") recently completed its first year of operations. The Center provides space to local groups for various purposes: community theater rehearsals, choral group rehearsals, band and orchestra rehearsals, dance classes, play readings, book group meetings lectures, neighborhood group meetings, etc. The HCC rented temporary space in a local school at a monthly cost of post-closing trial balance for the Heights Community Center as of December 31, 20x1 appears below: $1,500 During 20x2 the HCC plans to purchase its own building. The Heights Community Center Post-closing Trial Balance December 31, 20x1 $ 27,650 14 2,100 2,210 650 350 15,000 Cash Interest Receivable Notes Receivable "1" Prepaid Insurance Community Center supplies Office supplies Theater equipment (sound and lighting) Accumulated depreciation- theater equipment Office Furniture Accumulated depreciation- office furniture Computers Accumulated depreciation-computers Accounts payable Unearned short-term rental revenue Unearned long-term rental revenue Notes payable "A" Discount on notes payable "A" Common Stock (shares outstanding) Retained Earnings 1,833 2,232 134 2,160 627 1,456 5,800 13,200 1,600 69 15,000 12,784 1,500 S 52,434 $ 52,434 TOTAL Company policies: No reversing entries are used. All numbers are rounded to the nearest ollar. The straight-line method of depreciation is used for all fkxed assets. All depreciation is calculated to the nearest month. Rental revenue accounts are initially credited when cash is received for all rentals of that are still unearned. The Center prepares adjusting entries and financial statements once a year, on December 31st ACC 2101-Extra credit problem Additional information regarding items on the 12/31/x1 post-closing trial balance: 1) A four-month note receivable (note receivable "1") was initiated on December 1, 20x1 for: appropriate for this type of note. The full principal and interest is due on April 1, 20x2. 2) A three-year liability insurance policy was purchased on March 1, 20x1 for: Page 3 2,100 8% was the stated interest rate on the note and it was considered 3) The theater equipment was acquired on February 1, 20x1 for a cash payment of: The life of the theater equipment is estimated to be (number of years): The residual value (as a percentage of original cost) is estimated at: $ 3,060 15,000 20% 4) The office furniture was acquired on January 1, 20x1. Terms of purchase were as follows: Five additional payments due semi-annually, starting on 7/1/x1 (continuing with 1/1/x2, 7/1/x2, 1/1/x3 and 7/1/x3) were accepted as zero-interest bearing notes. date of first payment: 1/1/x1 Amount of first payment $ 400 The semi-annual payment is: 400 The appropriate annual interest rate in the circumstances was determined to be: 6% The note payable described above is referred to as Note Payable "A".] The life of the office furniture is estimated to be (number of years): The residual value (as a percentage of original cost) is estimated at: 15 10% 5) Computers were purchased on February 1, 20x1 for a cash payment of: The life of the computers is estimated to be (number of years): $ 2,160 The residual value (as a percentage of original cost) is estimated at 5% 6) The HCC rents space in several different ways. Certain groups rent space on a regular basis (e.g, twice a week for six months [long-term rentals]): certain groups rent space for a shorter duration (e.g, once a week for one month [short-term rentals]); and some rent space as needed [daily rentals]. Adjustments were made on 12/31/x1 to reflect the amounts of unearned rental revenues. The balances appear on the post-closing trial balance above. ACC 2101-Extra credit problem Page 4 1) On May 1, 20x2, the HCC purchased a vacant building which had been used for a short period of time as a dance studio and small performance space RercentageTotal cost: Land Building Heating/Air conditioning equipment Old theater equipment 10% 65% 20% 5% Terms of purchase: A cash down payment was paid on May 1, 20x2: A 30-year, 5% mortgage was arranged for the remaining amount: $ 48,000 352,000 DEPRECIATION was determined as follows BUILDING 30 Estimated life (in number of years) (Note: Depreciation will begin as of July 1,20x2-after renovation.) The residual value (as a percentage of original cost) is estimated at 15% HEATING AND A/C EQUIPMENT: Estimated life (in number of years- Depreciation to begin 5/1/x2) The residual value (as a percentage of original cost) is estimated at 10 0% OLD THEATER The old theater equipment is going to be sold and replaced and is, therefore, EQUIPMENT: not being depreciated $8,160 2) A two-year fire insurance policy was purchased on May 1, 20x2 for: 3) Renovation of the building began immediately after the purchase date. The renovation took two months to complete and the building was ready for use as of July 1, 20x2. [The renovation cost will be capitalized and added to the cost of the building. The depreciation on the building will begin on July 1, 20x2, the date the building was placed into use. See note 1 above for depreciation policy related to the building) The renovation cost was fully financed through the sale of no-par common stock. 3,500 Total renovation cost: $ 70,000 Number of shares issued: 4) The existing (old) theater equipment (e-g. amount purchased on February 1, 20x1 plus amount acquired on May 1, 20x2 with purchase of vacant building) was sold on July 1, 202 A note receivable was accepted in exchange for the old theater equipment (referred to as "Note Receivable "2") 35,000 Maturity value of note: Term of note (in number of years): Stated annual interest rate: Annual interest rate considered appropriate in circumstances 2% 5% ACC 2101-Extra credit problem Page 5 Specific transactions during 20x2: (continued) 5) New theater equipment was purchased on July 1, 20x2. Terms of purchase: An initial cash payment plus a non-interest bearing note payable (referred to as "Note Payable "B") were issued in exchange for the new theater equipment Initial cash payment: Maturity value of non-interest bearing note: Term of note (in number of years): Annual interest rate considered appropriate in circumstances: $ 10,000 125,000 7% DEPRECIATION of new theater equipment: Estimated life (in number of years) The residual value (as a percentage of original cost) is estimated at: 20% 6) New community center equipment was purchased on September 1, 20x2, for cash: $ 25,000 DEPRECIATION of community center equipment: Estimated life (in number of years) The residual value (as a percentage of original cost) is estimated at: 12% 7) Dividends were declared and paid on December 15, 20x2. Amount per share:$0.25 8) A mortgage payment was made on December 31, 20x2 for the period May 1, 20x2 through December 31, 20x2. Total payment: Amount applied to principal (e.g, mortgage payable account): Amount applied to mortgage interest expense: $ 15,266 3,533 $11,733 Summary transactions during 20x2; [Note: These transactions occur throughout the year, but are presented as summaries so that only one entry will have to be prepared for each of the summary transactions. Some of these transactions will be recorded at December 31, 20x2.] 1) All accounts payable outstanding at the end of 20x1 were paid in January 20x2. 2) Rental Revenue Information: a) All short-term unearned rental revenue amounts as of 12/31/x1 were earned in the first few months of 20x2. All long-term unearned rental revenue amounts as of 12/31/x1 were earned throughout 20x2. b) Cash received for long-term rental revenues during 20x2 amounted to: It was determined that the amount of long-term rentals unearned at 12/31/x2 was: c) Cash received for short-term rental revenues during 20x2 amounted to: it was determined that the amount of short-term rentals unearned at 12/31/x2 was: d) Cash received for daily rental revenues during 20x2 amounted to: 240,000 $ 28,800 $ 78,000 $ 1,450 $ 46,300 ACC 2101-Extra credit problem Page 6 3) It was determined that two clients who had arranged for long-term rentals were unable to make a few of their normal monthly payments during 20x2, but both had promised that full payments would be made during January 20x3. The amounts expected are: 4,200 (The HCC will be recording these amounts as accounts receivable at 12/31/x2.) 4) Total operating expenses (e-g, salaries, utilities, maintenance, advertising, etc.) incurred for the year ended 12/31/x2 were: paid in cash: $ 77,847 amount still owed: 14,828 92,675 5) All administrative expenses (e g., salaries, rent, utilities, etc.) incurred for the year ended 12/31/x2 were: paid in cash: 68,464 9,336 77,800 amount still owed: $ 2,340 $ 730 6) Additional community center supplies purchased during the year for cash: community center supplies on hand at year-end: $ 1,385 $ 525 7) Additional office supplies purchased during the year for cash: office supplies on hand at year-end: 8) The percentage of estimated uncollectible accounts receivable at the end of December, 20x2 is determined to be: 20%