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Homework Assignment #3 | Complete Solution

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Homework Assignment #3                                      Name: ___________________________________
 
                                         
Part 1: At December 31, 2012,  Silver Traders Company had the following trial balance.  

Silver Traders Company
Unadjusted Trial Balance
12/31/12
    Dr    Cr
Cash    360,000    
Accounts Receivable    60,000    
Allowance for Doubtful Accounts        3,000
Short Term Note Receivable    24,000    
Supplies    6,000    
Inventory    65,000    
Equipment    195,000    
Building        
Accumulated Depreciation        75,000
Copyright    44,000    
Accounts Payable        45,000
Dividends Payable        
Interest Payable        
Unearned Revenue        33,000
ST Note Payable        15,000
LT Mortgage Payable        
Bonds Payable        200,000
Premium on Bonds Payable        13,000
Common Stock - $1par        2,000
Additional Paid in Capital – CS        87,000
Preferred Stock - $5 par        1,000
Additional Paid in Capital – PS        50,000
Treasury Stock        
Retained Earnings        105,000
Dividends    6,000    
Sales        924,000
Sales Returns & Allowances    4,000    
Sales Discounts    9,000    
Cost of Goods Sold    385,000    
Bad Debts Expense        
Depreciation Expense    50,000    
Wages Expense    260,000    
Rent Expense    65,000    
Insurance Expense    16,000    
Supplies Expense    7,000    
Interest Revenue        1,000
Interest Expense    9,000    
Gain on Sale of Equipment        15,000
Income Tax Expense    4,000    
Total    1,569,000    1,569,000
        
        

Instructions:  You must turn in the work performed on the sheets printed with this page.  This WILL NOT BE ACCEPTED ON PLAIN PAPER.
•    Write the journal entries (on the following General Journal page) required for each of the events described below.  
•    Use ONLY the accounts listed on the trial balance for your journal entries.  
•    These transactions may not be in chronological order, it is ok to do the journal entries in the order given.
•    Post the transactions to individual T-accounts and prepare an adjusted trial balance for The Kash Leasing Company as of December 31, 2012.

 


1.    The company last paid interest on the ST note payable on November 1, 2012.   Record the accrued interest expense for the last 2 months of 2012.  The annual interest rate is 6.5%.  Round to nearest whole dollar.

2.    On Jan 1, 2012, the company issued 10%, 10-year bonds when the market rate for similar investments is 8%.  The company pays interest each year on January 1st.  Using the effective interest method of amortizing the premium on bonds payable, accrue the interest expense as of December 31, 2012.  Round to nearest whole dollar for your interest expense calculation.

3.    The company previously collected cash for sales that were to be completed in the future.  The company completed some of these sales during December and now owes only $18,000 of that unearned sales revenue. Record the necessary adjustment for December 31st, 2012.

4.    The company purchased a building November 30th with a LT Mortgage Payable of $150,000 at 8% interest. Record the purchase of the building.

5.    The above mortgage payable’s terms require the company to make installment payments over the term of the loan.  Each payment consists of interest on the unpaid balance of the loan and a reduction of loan principal. Record the first monthly payment of $1,850 on the LT Mortgage Payable on December 31st.

6.    On December 30th, 2012, the company purchased 50 shares of its own Preferred Stock for Treasury Stock for $13 per share.

7.    The company issued 500 shares of Common Stock for $6,000 on December 25th.

8.    On December 29th the company declared a cash dividend of $2.00 per share for common stock on the shares issued and declared (including the additional 500 shares declared on December 25th.)


 
 
GENERAL JOURNAL
DATE    ACCOUNT NAME    DEBIT    CREDIT
            
            
    
            
Use the space below for T-accounts (REQUIRED FOR GRADING). For each account in the journal entries, you will need to adjust the balance from the preliminary trial balance with the debit or credit from the journal entry. You only need to do T-accounts for those accounts that change from the JEs.
Silver Traders Company
ADJUSTED TRIAL BALANCE
12/31/12
    Dr    Cr
Cash        
Accounts Receivable        
Allowance for Doubtful Accounts        
Short Term Note Receivable        
Supplies        
Inventory        
Equipment        
Building        
Accumulated Depreciation        
Copyright        
Accounts Payable        
Dividends Payable        
Interest Payable        
Unearned Revenue        
ST Note Payable        
LT Mortgage Payable        
Bonds Payable        
Premium on Bonds Payable        
Common Stock - $1par        
Additional Paid in Capital – CS        
Preferred Stock - $5 par        
Additional Paid in Capital – PS        
Treasury Stock        
Retained Earnings        
Dividends        
Sales        
Sales Returns & Allowances        
Sales Discounts        
Cost of Goods Sold        
Bad Debts Expense        
Depreciation Expense        
Wages Expense        
Rent Expense        
Insurance Expense        
Supplies Expense        
Interest Revenue        
Interest Expense        
Gain on Sale of Equipment        
Income Tax Expense        
                                                             
                                                   Total        


1.    If this company had a CS 3-1 stock split on Dec 31st 2012:
a.    How many shares would there be after the split?


b.    What is the par value per share in dollars?

 

2.    How many shares are outstanding at 12/31/2012?


3.    What is the effect on the accounting equation when the Treasury Stock is purchased?

 

4.    Does the Carrying Value of the Bonds Payable and Premium increase or decrease over the life of the bonds?

 

5.    What will be the balance in the Mortgage Payable Account at Jan 31st after the second monthly payment is made.

 

6.    The Company is about to issue $2,000,000 of 5-year, 10% bonds.  Interest will be paid semi-annually. The market interest rate for such securities is 8%. How much can The Company expect to receive from the sale (issuance) of these bonds?


 
Part 2: NOTE: This is a DIFFERENT COMPANY. Using the trial balance below, complete the Multi-Step Income Statement and prepare the Statement of Retained Earnings and Classified Balance Sheet on the pages which follow.    To get full credit you must include all critical subtotals.

Klara Kay Company
Adjusted Trial Balance
December 31, 2012
    DEBIT    CREDIT
Cash    1,600    
Accounts Receivable    2,560    
Allowance for Uncollectible Accounts    670
Short term Note Receivable    200    
Interest Receivable     20    
Supplies    30    
Inventory    3,000    
Prepaid Expenses    150    
Equipment    10,720    
Accumulated Depreciation        1,970
Copyrights    600    
Accounts Payable        370
Interest Payable        20
Unearned Revenue        40
Long Term Note Payable        1,400
Common Stock        7,600
Add’l Paid-in-Capital        800
Retained Earnings (1/1/12)        3,160
Dividends    600    
Sales        36,900
Sales Returns & Allowances    40    
Sales Discounts    60    
Cost of Goods Sold    22,200    
Bad debt expense    30    
Depreciation Expense    770    
Amortization Expense    70    
Wages Expense    8,000    
Rent Expense    500    
Office Expense    80    
Supplies Expense    100    
Selling Expense    800    
Interest Expense    200    
Interest Revenue        150
Income Tax Expense    750    
Totals    53,080    53,080

Klara Kay Company
Multi Step Income Statement
For the year ended December 31, 2012
        

Klara Kay Company
Statement of Retained Earnings
For the year ended December 31, 2012
    


Klara Kay Company
Classified Balance Sheet
December 31, 2012
       

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[Solved] Homework Assignment #3 | Complete Solution

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