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Title : BUSN 5600 QC F2 2019 Accounting Theory and Practice : Connect Homework 1
Kimber Co. is in the process of liquidating and going out of business. The firm’s accountant has provided the following balance sheet and additional information:
Question 1 Circle-Square, Ltd., is in the process of liquidating and going out of business. The firm’s balance sheet shows $20,240 in cash, accounts receivable of $114,000, inventory totaling $63,300, plant and equipment of $259,000, and total liabilities of $307,700. It is estimated that the inventory can be disposed of in a liquidation sale for 85 percent of its cost, all but 20 percent of the accounts receivable can be collected, and plant and equipment can be sold for $185,444. Required: Calculate the amount of cash that would be available to the owners if the accounts receivable are collected, the other assets are sold as described, and the liabilities are paid off in full. (Deductible amounts should be indicated by a minus sign.) Question 2 Kimber Co. is in the process of liquidating and going out of business. The firm’s accountant has provided the following balance sheet and additional information: Assets Cash $ 17,500 Accounts receivable 61,500 Merchandise inventory 110,000 Total current assets $189,000 Land $ 50,000 Buildings & equipment 342,000 Less: Accumulated depreciation (191,000) Total land, buildings, & equipment 201,000 Total assets $390,000 Liabilities and Stockholders’ Equity Accounts payable $ 47,400 Notes payable 59,800 Total current liabilities $107,200 Long-term debt 53,700 Total liabilities $160,900 Stockholders’ Equity Common stock, no par $ 110,000 Retained earnings 119,100 Total stockholders’ equity 229,100 Total liabilities and stockholders’ equity $390,000 It is estimated that all but 6 percent of the accounts receivable can be collected, and that the merchandise inventory can be disposed of in a liquidation sale for 80 percent of its cost. Buildings and equipment can be sold at $40,000 above book value (the difference between original cost and accumulated depreciation shown on the balance sheet), and the land can be sold at its current appraisal value of $64,000. In addition to the liabilities included in the balance sheet, $2,005 is owed to employees for their work since the last pay period, and interest of $5,240 has accrued on notes payable and long-term debt. Required: a. Calculate the amount of cash that will be available to the stockholders if the accounts receivable are collected, the other assets are sold as described, and all liabilities and other claims are paid in full. Question 3 Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2016. Assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year then ended. Accounts receivable $ 32,600 Depreciation expense 10,200 Land 24,600 Cost of goods sold 87,000 Retained earnings 66,200 Cash 10,400 Equipment 68,500 Supplies 5,800 Accounts payable 22,400 Service revenue 23,800 Interest expense 2,900 Common stock 8,000 Income tax expense 16,659 Accumulated depreciation 40,000 Long-term debt 36,000 Supplies expense 13,000 Merchandise inventory 30,700 Sales revenue 151,000 Required: a. Calculate the total current assets at December 31, 2016. …ANS.….79500 (Accounts receivable + Cash + Supplies) b. Calculate the total liabilities and stockholders’ equity at December 31, 2016……ANS....132600 (Retained earnings + Accounts Payable + Common stock+ Long-term debt) c. Calculate the earnings from operations (operating income) for the year ended December 31, 2016………..ANS…...64600 (Sales revenue + Service revenue) – (Cost of goods sold + Depreciation expense + Supplies expense) d. Calculate the net income (or loss) for the year ended December 31, 2016……..ANS….45041 (Closing Balance of Retained Earnings + Dividends Paid - Net Income) e. What was the average income tax rate for Pope’s Garage for 2016…………....ANS…27) ([Income Tax/Net Income Before tax] * 100) f. If $18,500 of dividends had been declared and paid during the year, what was the January 1, 2016, balance of retained earnings? ………..ANS…….39659 (Retained Earns+Dvds paid-Net income/loss) Question 4 The information on the following page was obtained from the records of Breanna, Inc.: Accounts receivable $ 10,800 Accumulated depreciation 51,000 Cost of goods sold 121,000 Income tax expense 9,000 Cash 65,000 Sales 194,000 Equipment 123,000 Selling, general, and administrative expenses 35,000 Common stock (8,600 shares) 98,000 Accounts payable 14,900 Retained earnings, 1/1/16 26,750 Interest expense 5,900 Merchandise inventory 38,400 Long-term debt 35,000 Dividends declared and paid during 2016 11,550 Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year ended December 31, 2016. There were no changes in paid-in capital during the year. Required: a. Prepare an income statement and statement of changes in stockholders' equity for the year ended December 31, 2016, and a balance sheet at December 31, 2016, for Breanna, Inc. Based on the financial statements that you have prepared for part a, answer the questions in parts b-e. b. What is the company's average income tax rate? c. What interest rate is charged on long-term debt? d. What is the par value per share of common stock? e. What is the company's dividend policy (i.