MGAB02H3 Lecture Notes - Lecture 1: Debits And Credits

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champagneserval218

24 Mar 2015

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Purchase a building and pay $ 600,000 in cash. Purchase a building and pay $ 300,000 in cash and the rest is financed through a bank loan. The value of the building = $ 600,000. Purchase a building for $ 600,000 = paid $ 300,000 in cash and the rest is through the issuance of common shares. Purchase the building for $ 600,000 and th eowner of the builidng is giving a term of 2/10, net 30 for the customer to pay. Assume the company paid within the discount period. Assume the company did not pay within the discount period. 600,000 ($ 600,000 x 2%) basket purchase - purchase different assets in bulk. Paid $ 2,000,000 to purchase land, building and equipment. Needs to break down th evalue by each asset. Use fv from each asset individually to allocate the purchase price. Ifrs requires the assets be recorded based on componentization.

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the following Dec 31 year-end adjusted trial balance is forHeath Wilmer Co.The credit balance in Heath Wilmer Owner Capital atthe beginning of the year, January 1, was $320,000. The Owner,Heath Wilmer, invested an additional $300,000 during the currentyear. The land held for future expansion was also purchased duringthe current year.

Heath Wilmer Co. Adjusted Trial balance December 31
Cash	$90,000
Account receceivable	18,000
Prepaid insurance	6,000
Office supplies	2,000
Investments in stocks	150,000
Land held for future expasion	300,000
Office equipment	18,000
Accumulated depreciation-Equipment		$4,000
Building	600,000
Accumulated depreciation-Building		170,000
Intangible assets-licensing agreement	50,000
Accounts payable		17,800
Salaries Payable		16,400
Long-term note payable		224,000
Heath Wilmer, Capital		620,000
Health Wilmer, Withdrawals	60,000
Service fees earned		470,800
Salaries expense	180,000
Insurance expense	12,000
Rent expense	25,000
Depreciation expense-Equipment	2,000
Depreciation expense-Building	10,000
Totals	$1,523,000	$1,523,000

Required:

1. Prepare a classified year-end balance sheet. (Note: A $22,000installment on the long-term note payable is due within oneyear.)

2. Using the information presented:

(a) Calulate the current ratio. Comment on the ability of HeathWilmer Co. to meets its short-term debts.

(b) Calulate the debt ratio and comment on the financialposition and risk analysis of Heath Wilmer Co.

(c) Using the account balances to analyze the financial positionof Heath Wilmer Co., why would the owner need to invest anadditional $300,000 in the bussiness when the business is alreadyprofitable and the owner had an existing capital balance of$320,000?

Menardo Corporation began the month of June with $600,000 ofcurrent assets, a current ratio of 2.5:1, and an acid-test ratio of1.4:1. During the month, it completed the following transactions(the company uses a perpetual inventory system).

June 1 Sold merchandise inventory that cost $150,000 for $240,000cash.
3 Collected $176,000 cash on an account receivable.
5 Purchased $300,000 of merchandise inventory on credit.
7 Borrowed $200,000 cash by giving the bank a 60-day, 8%note.
10 Borrowed $240,000 cahs by signing a long-term securednote.
12 Purchased machinery for $550,000 cash.
15 Declared a $1 per share cash divedend on its 160,000 shares ofoutstanding common stock.
19 Wrote off a $10,000 bad debt against the Allowance for DoubtfulAccounts account.
22 Paid $24,000 cash to settle an account payable.
30 Paid the dividend declared on June 15.
Required
Prepare a table showing the company's (1) current ratio,(2)acid-test ratio, and (3) working capital after each transaction.Round ratios to two decimals.

bluepanda69

Preparation of Financial Statements (38 points): One World Not Three (OWNT) Relief Fund is an international nonprofit relief agency based in the United State OWNT recently celebrated its tenth anniversary and is in the middle of trying to expand its operations and funding sources. OWNT uses accrual accounting and follows all US GAAP and FASB accounting rules when reporting its financial situation. During its 2006 fiscal year (July 1, 2005 â June 30, 2006), OWNT recorded the following financial events:

1.Earned $250,000 by providing disaster readiness training program Received $235,000 in cash.

2.Took out a $500,000 bank loan. OWNT is hoping to buy the building next door for$500,000 in order to double its office space.

3.Received $200,000 in contribution pledge $150,000 of which was received in cash.OWNT expects that 10% of the pledges not immediately collected in cash will not be collected.

4.Received a final payment of $350,000 from a three-year grant made three years ago.

5.Purchased the building next door for $560,00 OWNT expects that its current building will last another 20 years and that the new building has a life of 35 years. OWNT uses straight-line depreciation.

6.Purchased $175,000 in first aid kit inventory. Paid 80% of the inventory in cash. The 20% balance will be paid in August 2006.

7.OWNT paid its employees $580,000 in wage Wage expense for the year was $600,000. The payment included the wages payable balance outstanding from fiscal year 2005.

8.First aid kits inventory equals $12,000 at the end of the year.

9.Complied with the terms of the bank loan, which require OWNT to repay $28,000 of the loan at the end of fiscal year 2006 plus pay 7% interest on the outstanding principal balance carried during the year.

lavendersquirrel980

MGAB02H3 Lecture Notes - Lecture 1: Debits And Credits

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