Fowler Co.s balance sheet showed the following at December 31, 2011

Fowler Co.s balance sheet showed the following at December 31, 2011

Common stock, $10 par                                              $100,000

Paid-in capital – excess of par                         50,000
Retained earnings                                            20,000

A cash dividend is declared on December 31, 2011, and is payable on January 20, 2012, to shareholders of record on January 10, 2012.

Required:

(1) Prepare all appropriate journal entries (in proper format), assuming a cash dividend in the amount of $1.00 per share. (2.) Prepare all appropriate journal entries, assuming a cash dividend in the amount of $5.00 per share.

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 (1.)

December 31, 2011 Retained earnings [($1 x ($100,000/$10)]          10,000

Cash dividends payable                                              10,000

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Harding Company is in the process of purchasing several large pieces of equipment from Danning

P6-3 Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation. Several financing alternatives have been offered by Danning:

1. Pay $1,000,000 in cash immediately.

2. Pay $420,000 immediately and the remainder in 10 annual installments of $80,000, with the first installment due in one year.

3. Make 10 annual installments of $135,000 with the first payment due immediately.

4. Make one lump-sum payment of $1,500,000 five years from date of purchase.

 

Required:

Determine the best alternative for Harding, assuming that Harding can borrow funds at an 8% interest rate.

 

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15-6 Real World Case - Lease concepts; Walmart Walmart Stores, Inc., is the world's largest retailer.

15-6 Real World Case - Lease concepts; Walmart Walmart Stores, Inc., is the world's largest retailer. A large portion of the premises that the company occupies are leased. Its financial statements and disclosure notes revealed the following information: Real World Financials

 

 

Required:

1. Discuss some possible reasons why Walmart leases rather than purchases most of its premises.

2. The net asset “property under capital lease” has a 2009 balance of $2,797 million ($5,341 − 2,544). Liabilities for capital leases total $3,515 ($315 + 3,200). Why do the asset and liability amounts differ?

3. Prepare a 2009 summary entry to record Walmart's lease payments, which were $603 million.

4. What is the approximate average interest rate on Walmart's capital leases? (Hint: See Req. 3)

 

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Real World Case 15-6

 

Requirement 1

Leasing can allow a firm to conserve assets, to avoid some risks of owning assets, and obtain favorable tax benefits.  Also, leasing sometimes is used as a means of “off-balance-sheet financing.”  When funds

 

 

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Pastina Company manufactures and sells various types of pasta to grocery chains as private label brands. The company's fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2011, appears below.

P2-3 Adjusting entries

 

Pastina Company manufactures and sells various types of pasta to grocery chains as private label brands. The company's fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2011, appears below.

 

 

Information necessary to prepare the year-end adjusting entries appears below.

 

1. Depreciation on the equipment for the year is $10,000.

2. The company estimates that of the $40,000 in accounts receivable outstanding at year-end, $5,500 probably will not be collected.

3. Employee wages are paid twice a month, on the 22nd for wages earned from the 1st through the 15th, and on the 7th of the following month for wages earned from the 16th through the end of the month. Wages earned from December 16 through December 31, 2011, were $1,500.

4. On October 1, 2011, Pastina borrowed $50,000 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.

5. On March 1, 2011, the company lent a supplier $20,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2012.

6. On April 1, 2011, the company paid an insurance company $6,000 for a two-year fire insurance policy. The entire $6,000 was debited to insurance expense.

7$800 of supplies remained on hand at December 31, 2011.

8. A customer paid Pastina $2,000 in December for 1,500 pounds of spaghetti to be manufactured and delivered in January 2012. Pastina credited sales revenue.

9. On December 1, 2011, $2,000 rent was paid to the owner of the building. The payment represented rent for December and January 2012, at $1,000 per month.

 

Required:

Prepare the necessary December 31, 2011, adjusting journal entries.

 

 

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