Lansbury Inc. had the balance sheet shown on the following page at December 31, 2013.

Lansbury Inc. had the balance sheet shown on the following page at December 31, 2013.

P5-6 (Preparation of a Statement of Cash Flows and a Balance Sheet) Lansbury Inc. had the balance sheet shown on the following page at December 31, 2013.

LANSBURY INC. Balance Sheet December 31, 2013
Cash	$20,000	Accounts Payable	$30,000
Accounts Receivable	21,200	Notes Payable (Long-term)	41,000
Investments	32,000	Common Stock	100,000
Plant Assets (Net)	81,000	Retained Earnings	23,200
Land	40,000
	$194,200		$194,200

During 2014 the following occurred:

1. Lansbury Inc. sold part of its investment portfolio for $15,000 This transaction resulted in a gain of $3,400 for the firm. The company classifies its investments as available-for - sale.

2. A tract of land was purchased for $18,000 cash.

3. Long-term notes payable in the amount of $16,000 were retired before maturity by paying $16,000 cash.

4. An additional $20,000 in common stock was issued at par.

5. Dividends totalling $8,200 were declared and paid to stockholders.

6. Net income for 2014 was $32,000 after allowing for depreciation of $11,000

7. Land was purchased through the issuance of $30,000 in bonds.

8. At December 31, 2014, Cash was $32,000 Accounts Receivable was $41,600 and Accounts Payable remained at $30,000

 

Instructions

(a) Prepare a statement of cash flows for 2014.

(b) Prepare an unclassified balance sheet as it would appear at December 31, 2014.

(c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios.

 

TUTORIAL PREVIEW

(a) Prepare a statement of cash flows for 2014.

LANSBURY INC. Statement of Cash Flows For the Year Ended December 31, 2014
Cash flows from operating activities
Net income		$32,000
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation Expense	$11,000
Gain on sale of investments	-3,400

 

File name: P5-6 Lansbury Inc.xls File type: xls-template PRICE: $10

P14-5 P14-6 and P14-7 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2014. The bonds pay interest on September 1 and March 1.

P14-5 P14-6 and P14-7

P14-5 (Comprehensive Bond Problem) In each of the following independent cases the company closes its 5 books on December 31.

 

1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2014. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2017. The bonds yield 12%. Give entries through December 31, 2015.

2. Titania Co. sells $400,000 of 12% bonds on June 1, 2014. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2018. The bonds yield 10%. On October 1, 2015, Titania buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2016.

 

Instructions

For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective-interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)

 

P14-6 (Issuance of Bonds between Interest Dates, Straight-Line, Redemption) Presented below are selected transactions on the books of Simonson Corporation.

01-May-14

Dec. 31

Jan. 1, 2015 April 1

Dec. 31

 

Instructions

Bonds payable with a par value of $900,000, which are dated January 1, 2014, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2024. (Use interest expense account for accrued interest.) Adjusting entries are made to record the accrued interest on the bonds, and the amortiza- tion of the proper amount of premium. (Use straight-line amortization.) Interest on the bonds is paid. Bonds with par value of $360,000 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized. (Round to two decimal places.)

Prepare journal entries for the transactions above.

 

P14-7 (Entries for Life Cycle of Bonds) On April 1, 2014, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2015, Seminole took advantage of favorable prices of its stock to extinguish 6,000 of the bonds by issuing 200,000 shares of its $10 par value common stock. At this time, the accrued interest was paid in cash. The company’s stock was selling for $31 per share on March 1, 2015.

 

Instructions

Prepare the journal entries needed on the books of Seminole Company to record the following.

(a)    April 1, 2014: issuance of the bonds.

(b)   October 1, 2014: payment of semiannual interest.

(c)    December 31, 2014: accrual of interest expense.

(d)    March 1, 2015: extinguishment of 6,000 bonds. (No reversing entries made.)

 

TUTORIAL PREVIEW

1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2014. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2017. The bonds yield 12%. Give entries through December 31, 2015.

1. Sanford Co.
Calculation of present value of bonds:
Rate = 12%/ 2 =	6%
Nper =	7
PMT = 500,000 x 10%x 1/2 =	-25000
FV =	-500,000

 

File name: P14-5 P14-6 P14-7.xls File type: xls  PRICE: $20

Week 4 Homework E15-2 E15-5 and E15-6 - E15-2 (Recording the Issuance of Common and Preferred Stock) Kathleen Battle Corporation was orga- nized on January 1, 2014.

E15-2  E15-5 and E15-6


Week 4 Homework E15-2  E15-5 and E15-6


E15-2 (Recording the Issuance of Common and Preferred Stock) Kathleen Battle Corporation was orga- nized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.


Jan. 10 Issued 80,000 shares of common stock for cash at $5 per share.
Mar.1 Issued 5,000 shares of preferred stock for cash at $108 per share.
Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000; the fair value of the land was $80,000.
May 1 Issued 80,000 shares of common stock for cash at $7 per share.
Aug.1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $50,000 for services rendered in helping the company organize.
Sept.1 Issued 10,000 shares of common stock for cash at $9 per share.
Nov.1 Issued 1,000 shares of preferred stock for cash at $112 per share.


Instructions
Prepare the journal entries to record the above transactions.


E15-5 (Lump-Sum Sales of Stock with Preferred Stock) Dave Matthew Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $100,000.


Instructions
Prepare the journal entry for the issuance when the market price of the common shares is $165 each and market price of the preferred is $230 each. (Round to nearest dollar.)

Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $170 per share.

E15-6 (Stock Issuances and Repurchase) Lindsey Hunter Corporation is authorized to issue 50,000 shares of $5 par value common stock. During 2014, Lindsey Hunter took part in the following selected transactions.
1. Issued 5,000 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,000.
2. Issued 1,000 shares of stock for land appraised at $50,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.
3. Purchased 500 shares of treasury stock at $43 per share. The treasury shares purchased were  issued in 2010 at $40 per share.


Instructions
(a) Prepare the journal entry to record item 1.
(b) Prepare the journal entry to record item 2.
(c) Prepare the journal entry to record item 3 using the cost method.


TUTORIAL PREVIEW
Prepare the journal entries to record the above transactions.

Jan.10	Cash (80,000 X $5)	400,000
	Common Stock (80,000 X $1)		80,000
	Paid-in Capital in Excess of Stated Value —                     Common Stock (80,000 X $4)		320,000

File name: E15-2 E15-5 E15-6 - week4.doc  File type: xls  PRICE: $12

P5-2 Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014.

Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014.

P5-2 Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014.

Goodwill	$125,000	Accumulated Depreciation - Equipment	$292,000
Payroll Taxes Payable	177,591	Inventory	239,800
Bonds Payable	300,000	Rent Payable - Short-term	45,000
Discount on Bonds Payable	15,000	Income Tax Payable	98,362
Cash	360,000	Rental Expense Long-term	480,000
Land	480,000	Common Stock, $1 Par Value	200,000
Notes Receivable	445,700	Preferred Stock, $10 Par Value	150,000
Notes Payable to Banks	265,000	Prepaid Expenses	87,920
Accounts Payable	490,000	Equipment	1,470,000
Retained Earnings	?	Equity Investments (Trading)	121,000
Income Taxes Receivable	97,630	Accumulated Depreciation - Buildings	270,200
Unsecured Notes Payable (Long-term)	1,600,000	Buildings	1,640,000

Instructions

Prepare a classified balance sheet in good form. Common stock authorized was400,000shares, and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Cost and fair value of marketable securities are the same.

TUTORIAL PREVIEW

MONTOYA, INC.
Balance Sheet
December 31, 2014
Assets
Current assets
Cash		$360,000
Equity Investments (Trading)		121,000
Notes Receivable		445,700
Income Taxes Receivable		97,630
Inventory		239,800
Prepaid Expenses		87,920
Total current assets			$1,352,050

 

File name: P5-2 Montoya.xls  File type: xls  PRICE: $10