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MGAB02H3 Lecture Notes - Lecture 9: F 17 Kallinge, Retained Earnings, Accounts Payable

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peachturtle345
6 Jan 2016
School
UTSC
Department
Financial Accounting
Course
MGAB02H3
Professor
George Quan Fun

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Document Summary

E9 3 (1) r; (2) c; (3) c; (4) r ; (5) c; (6) c; (7) n; (8) c; (9) r; (10) n. Total consideration given up, or cost, is ,000 + ,000 + $ 360,000 = ,000. Total market value of assets acquired = ,000 + ,000 + ,000 = ,000. Allocation of cost: (a) land: ,000 / ,000 x ,000 = ,000. (b) building: ,000 / ,000 x ,000 = ,000. (c) equipment: ,000 / ,000 x ,000 = ,000. Amount to be depreciated: ,000 ,000 = ,000: ,000 4 years = ,500 per year. Units-of-production: ,000 120,000 units = $. 75 per unit. Double-declining-balance (rate: 2 x the straight line rate of 25% (2/4) = 50%): The double-declining-balance method would result in the lowest earnings per share for. Year 1 because it produced the highest depreciation expense and therefore the lowest net earnings (from requirement 1).

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Related Questions

The balance sheet for Plasma Screens Corporation along with additional information, are provided below:

PLASMA SCREENS CORPORATION
Balance Sheets
December 31, 2018 and 2017
2018 2017
Assets:
Current assets:
Cash $ 82,000 $ 120,000
Accounts receivable 72,000 96,000
Inventory 65,000 80,000
Prepaid rent 5,000 4,000
Long-term assets:
Land 500,000 500,000
Equipment 800,000 600,000
Accumulated depreciation (380,000) (300,000)
Total assets $ 1,144,000 $ 1,100,000
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 78,000 $ 82,000
Interest payable 5,000 9,000
Income tax payable 9,000 7,000
Long-term liabilities:
Notes payable 75,000 150,000
Stockholders' equity:
Common stock 600,000 600,000
Retained earnings 377,000 252,000
Total liabilities and stockholders' equity $ 1,144,000 $ 1,100,000


Additional Information for 2018:

1. Net income is $160,000.

2. The company purchases $200,000 in equipment.

3. Depreciation expense is $80,000.

4. The company repays $75,000 in notes payable.

5. The company declares and pays a cash dividend of $35,000.

Prepare the statement of cash flows using the indirect method.

PLASMA SCREENS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash flows from operating activities:
Net cash flows from operating activities
Cash Flows from Investing Activities
Net cash flows from investing activities
Cash Flows from Financing Activities
Net cash flows from financing activities
Cash at the beginning of the period
Cash at the end of the period

The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $870,000. At the acquisition date, the fair value of the noncontrolling interest was $580,000 and Keller’s book value was $1,160,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $290,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $50,000 on January 2, 2017, for $120,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $238,000 to Gibson at a price of $340,000. During 2018, intra-entity shipments totaled $390,000, although the original cost to Keller was only $253,500. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $55,000 at the end of 2018. Gibson Company Keller Company Sales $ (990,000 ) $ (690,000 ) Cost of goods sold 690,000 490,000 Operating expenses 180,000 50,000 Equity in earnings of Keller (90,000 ) 0 Net income $ (210,000 ) $ (150,000 ) Retained earnings, 1/1/18 $ (1,306,000 ) $ (715,000 ) Net income (above) (210,000 ) (150,000 ) Dividends declared 120,000 65,000 Retained earnings, 12/31/18 $ (1,396,000 ) $ (800,000 ) Cash $ 188,000 $ 100,000 Accounts receivable 394,000 600,000 Inventory 580,000 510,000 Investment in Keller 1,002,000 0 Land 160,000 580,000 Buildings and equipment (net) 515,000 490,000 Total assets $ 2,839,000 $ 2,280,000 Liabilities $ (663,000 ) $ (900,000 ) Common stock (780,000 ) (510,000 ) Additional paid-in capital 0 (70,000 ) Retained earnings, 12/31/18 (1,396,000 ) (800,000 ) Total liabilities and equities $ (2,839,000 ) $ (2,280,000 ) (Note: Parentheses indicate a credit balance.) Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $155,000 book value (cost of $330,000) to Keller for $290,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.

WeaverCorporation's stock is selling for $16 per share. Weaver providedthe following financial statements. Use these statements to preparecomprehensive ratio analysis tables similar to those illustrated inthe chapter.
WEAVER CORPORATION
Comparative Balance Sheet
December 31, 20X3 and 20X2
Assets 20X3 20X2
Current assets
Cash $ 500,000 $ 370,000
Accounts receivable 350,000 290,000
Inventories 90,000 110,000
Total current assets $ 940,000 $ 770,000
Property, plant, & equipment
Land $ 200,000 $ 200,000
Building 650,000 650,000
Equipment 950,000 900,000
$ 1,800,000 $ 1,750,000
Less: Accumulated depreciation (365,000) (325,000)
Total property, plant, & equipment $ 1,435,000 $ 1,425,000
Total assets $ 2,375,000 $ 2,195,000
Liabilities
Current liabilities
Accounts payable $ 160,000 $ 200,000
Interest payable 40,000 30,000
Total current liabilities $ 200,000 $ 230,000
Long-term liabilities
Long-term note payable 800,000 700,000
Total liabilities $ 1,000,000 $ 930,000
Stockholders' equity
Common stock ($0.50 par) $ 100,000 $ 100,000
Paid-in capital in excess of par 655,000 655,000
Retained earnings 620,000 510,000
Total stockholders' equity $ 1,375,000 $ 1,265,000
Total liabilities and equity $ 2,375,000 $ 2,195,000
WEAVER CORPORATION
Statement of RetainedEarnings
For the Year Ending December 31,20X3
Beginning retained earnings, January 1 $ 510,000
Plus: Net income 160,000
$ 670,000
Less: Dividends 50,000
Ending retained earnings, December 31 $ 620,000
WEAVER CORPORATION
Income Statement
For the year ending December 31,20X3
Revenues $ 1,685,000
Cost of goods sold 980,000
Gross profit $ 705,000
Operating expenses
Salaries $ 245,000
Interest 65,000
Depreciation 40,000
Other operating expenses 155,000 505,000
Income before income taxes $ 200,000
Less: Income taxes 40,000
Net income $ 160,000
Current Ratio 4.70
Current Assets ÷ CurrentLiabilities $940,000 ÷ $200,000
Quick Ratio
Debt to Total AssetsRatio
Debt to Total EquityRatio
Times Interest EarnedRatio
Accounts Receivable TurnoverRatio
Inventory TurnoverRatio
Net Profit on Sales
Gross Profit Margin
Return on Assets
Return on Equity
EPS
P/E
Dividend Rate/Yield
Dividend PayoutRatio
Book Value Per Share