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CROWN and PRINCE Crown & Prince are virtually identical companies, both companies began operations at the beginning of 2018 by issuing 20.000 shares. $5.00 par common stock $100.000 and long term debt of $200,000 During the year, both companies purchased inventory as follows: units Unit cost Jan-18 10.000 $4.00 Apr-18 10.000 $5.00 Aug-18 10,000 $8.00 Nov 18 10,000 $7.00 40.000 Total Cost $40.000 $50.000 $60,000 $70,000 $220,000 **** CROWN uses the first in first-out (FIFO) method, and PRINCE uses the last-in last-out (LIFO) method of inventory. Both companies sold 35.000 units QUESTION 1: Compute the COST OF GOODS SOLD and INVENTORY for each company, SHOW YOUR CALCULATIONS CROWN PRINCE COGS COGS Inventory Inventory Inventory During the year. both companies had sales (al for credit) of $500.000 QUESTION 2: Prepare the following portion of the Income Statement: CROWN PRINCE Sales Revenue COGS Gross Profit GP% *** Crown uses the percent of sales method to establish a reserve for bad debt, Prince uses the Aging of Accounts Receivable 3% CROWN Estimated PERCENT OF SALES FOR BAD DEBT PRINCE AGING OF A/R at 12/31/2018 AGING Total Current 1-30 (31-60 61.90 $110.000 $50,000 $25.000 $15,000 $10.000 over 90 days $10.000 2% 5% 10% 20% 35% Estimated % of Uncollectible SO QUESTION 3: Determine the BAD DEBT EXPENSE for each company CROWN PRINCE Bad Debt Expense *** In early January, both companies purchased equipment costing $200,000 with a 10-year useful live & no salvage value CROWN USES the STRAIGHT LINE METHOD method of depreciation PRINCE USES the DOUBLE-DECLINING BALANCE method of depreciation QUESTION 4 Determine the depreciation expense of each company CROWN PRINCE DEPRECIAION EXP. FOR 2018 DEPRECIAION EXP. FOR 2018 BIL Cont. Salve Value Life Double Straight Line Rate Dop Balatyr end 2018 2019 2020 QUESTION 5: Complete the income Statement CROWN INCOME STATEMENT For the year ending Dec 31, 2018 PRINCE INCOME STATEMENT For the year ending Dec 31, 2018 Sales Revenue COGS Gross Profit GPX Selling General & Adm. Expenses Depreciation Exp. Bad Debt Exp Other SGA Total SGA Net INCOME before Income Tax Income Tax (30%) NET INCOME $175.000 $175.000 *** Both companies paid a dividend of $10,000 to the stockholders QUESTION 6: Complete the Statement of Retained Earrings CROWN Statement of Retained Earnings For the year ending Dec 31, 2018 PRINCE Statement of Retained Earnings For the year ending Dec 31, 2018 Retained Earnings, 1/1/16 1/1/18 Net Income Dividende Retained Earnings, 12/31/17 12/31/18 QUESTION 7 Determine Earnings Per Share (show work) EPS Not Income Plaferred Divienda Average # of shares outstanding QUESTION 7: EPS- Determine Earnings Per Share (show work) Net Income-Pleterred Diviends Average of shares outstanding QUESTION 8: Complete the following Statement of Cash Flows for 2018. (remember both companies were newly formed in 2018 & thus had no opening balances in any account) WHAT WE KNOW CROWN PRINCE Net Income Net Income Depreciation Expense Depreciation Expense Accounts Receivable Gross Alowance for Doubtful Adhunts Net Accounts Receivables Accounts Receivable Gross Allowance for Doubtful Accounts Net Accounts Receivables So 50 Inventory Inventory Tax Liability Tax Liability Purchase of Equipment $200,000 Purchase of Equipment $200,000 Common Stock Issued $100,000 Common Stock Issued $100,000 Long Term Debt Issued $200,000 Long Term Debt issued $200,000 Dividends Paid $10,000 Dividends Paid $10.000 BOTH COMPANIES WERE FORMED JANUARY 1. THUS, NO OPENING BALANCE SHEET CROWN Statement of Cash Flow For the year ending December 31, 2018 PRINCE Statement of Cash Flow For the year ending December 31, 2018 Cash Flow from Operations Net Income Adjustments to reconcile not income to net Cash Flow from Operations Net Income Adjustments to reconcile net income to net Cash provided by operating activities Depreciation expense Change in Current Assets/Current Liabilties Accounts Receivable Inventory Income Tax Payable Cash provided by operating activities Depreciation expense Change in Current Assets Current Liabilities Accounts Receivable Inventory Income Tax Payable Net Cash provided by Operating Activities Net Cash provided by Operating Activities Cash Flow from Investing Activities Purchase of Equipment Net Cash provided by investing Activities Cash Flow from Investing Activities Purchase of Equipment Net Cash provided by Investing Activities Cash Flow from Financing Activities Issuance of Stock Issuance of Bonds Payment of Cash Dividend Net Cash provided by Finance Activities Cash Flow from Financing Activities Issuance of Stock Issuance of Bonds Payment of Cash Dividend Net Cash provided by Finance Activities Net Cash Flow Net Cash Flow

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