🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeClass Notes1,200,000US530,000

ACCT 2101 Lecture Notes - Lecture 8: Accounts Payable, Current Liability, Promissory Note

28 views5 pages
burgundyhound215
13 Mar 2019
School
Georgia Tech
Department
Accounting
Course
ACCT 2101
Professor
Blunck

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Liabilities: probable future sacrifices of economic benefits arising from present obligations to other entities resulting from past transactions or events. Accounts payable: obligations to suppliers for goods or services purchased on open account. Trade notes payable: similar to accounts payable, but recognized by a written promissory note. Short-term notes payable: cash borrowed from the bank and recognized by a promissory note. Credit lines: prearranged agreements with a bank that allow a company to borrow cash without following normal loan procedures and paperwork. Current maturities of long-term obligations are usually reclassified and reported as current liabilities if they are payable within the upcoming year (or operating cycle, if longer than a year). Interest on note = carrying value * annual interest rate * length of time. On september 1, eagle boats borrows ,000 from cooke bank. The note is due in 6 months and has a stated interest rate of 9%.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACCT 2101 Chapter Notes - Chapter 2: General Ledger, Trial Balance, Accounting Equation
lemonclam298
ACCT 2101
Final Exam
Study Guide
ACCT 2101 Midterm: Exam 1 Review
burgundyhound215
ACC 3000 Chapter Notes - Chapter 13: Current Liability, Sales Tax, Promissory Note
scarletsnail973

Related Questions

Forten Company, a merchandiser, recently completed itscalendar-year 2015 operations. For the year, (1) all sales arecredit sales, (2) all credits to Accounts Receivable reflect cashreceipts from customers, (3) all purchases of inventory are oncredit, (4) all debits to Accounts Payable reflect cash paymentsfor inventory, and (5) Other Expenses are paid in advance and areinitially debited to Prepaid Expenses. The company's incomestatement and balance sheets follow.

FORTEN COMPANY
Comparative Balance Sheets
December 31, 2015 and 2014

2015

2014
Assets
Cash $ 49,800 $ 74,000
Accounts receivable 65,900 59,000
Inventory 277,000 252,500
Prepaid expenses 1,500 1,700
Total current assets 394,200 387,200
Equipment 158,500 106,500
Accum. depreciation—Equipment (36,375) (46,000)
Total assets $ 516,325 $ 447,700
Liabilities and Equity
Accounts payable $ 54,325 $ 113,000
Short-term notes payable 9,000 8,000
Total current liabilities 63,325 121,000
Long-term notes payable 65,000 48,000
Total liabilities 128,325 169,000
Equity
Common stock, $5 par value 162,500 150,750
Paid-in capital in excess of par, common stock 35,250 0
Retained earnings 190,250 127,950
Total liabilities and equity $ 516,325 $ 447,700
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2015
Sales $ 582,500
Costof goods sold 287,000
Gross profit 295,500
Operating expenses
Depreciation expense $ 20,000
Other expenses 132,000 152,000
Other gains (losses)
Loss on sale ofequipment (5,250)
Income before taxes 138,250
Income taxes expense 24,250
Netincome $ 114,000
Additional Information on Year 2015Transactions
a. Net income was$114,000.
b. Accountsreceivable increased.
c. Inventoryincreased.
d. Prepaid expensesdecreased.
e. Accounts payabledecreased.
f. Depreciationexpense was $20,000.
g.

Sold equipment costing $46,500, with accumulated depreciation of$29,625, for $11,625 cash. This yielded a loss of $5,250.
h.

Purchased equipment costing $98,500 by paying $25,000 cash and(i.) by signing a long-term note payable for thebalance.
j. Borrowed $1,000cash by signing a short-term note payable.
k. Paid $56,500cash to reduce the long-term notes payable.
l. Issued 2,350shares of common stock for $20 cash per share.
m. Declared andpaid cash dividends of $51,700.
Required:

Prepare a complete statement of cash flows using a spreadsheet;report its operating activities using the indirect method.(Enter all amounts as positive values.)

FORTEN COMPANY
Spreadsheet for Statement ofCash Flows
For Year Ended December 31,2015
Analysis of Changes
December 31, 2014 Debit Credit December 31, 2015
Balance sheet—debit
Cash $74,000 $49,800
Accounts receivable 59,000
Inventory 252,500
Prepaid expenses 1,700
Equipment 106,500
$493,700
Balance sheet—credit
Accumulateddepreciation—Equipment $46,000
Accounts payable 113,000
Short-term notes payable 8,000
Long-term notes payable 48,000
Common stock, $5 parvalue 150,750
Paid-in capital in excess ofpar value, common stock 0
Retained earnings 127,950
$493,700
Statement of cash flows
Operating activities
Investing activities
Financing activities
Non cash investing andfinancing activities
Purchase of equipment financedby long-term note payable

Use the following information for the Problems below.

Forten Company, a merchandiser, recently completed itscalendar-year 2017 operations. For the year, (1) all sales arecredit sales, (2) all credits to Accounts Receivable reflect cashreceipts from customers, (3) all purchases of inventory are oncredit, (4) all debits to Accounts Payable reflect cash paymentsfor inventory, and (5) Other Expenses are paid in advance and areinitially debited to Prepaid Expenses. The company’s incomestatement and balance sheets follow.

FORTEN COMPANY
Comparative Balance Sheets
December 31, 2017 and 2016
2017 2016
Assets
Cash $ 60,400 $ 80,500
Accounts receivable 76,340 57,625
Inventory 286,156 258,800
Prepaid expenses 1,280 2,035
Total current assets 424,176 398,960
Equipment 150,500 115,000
Accum.depreciation—Equipment (40,125 ) (49,500 )
Total assets $ 534,551 $ 464,460
Liabilities andEquity
Accounts payable $ 60,141 $ 125,175
Short-term notes payable 12,100 7,400
Total current liabilities 72,241 132,575
Long-term notes payable 61,500 55,750
Total liabilities 133,741 188,325
Equity
Common stock, $5 par value 176,750 157,250
Paid-in capital in excess ofpar, common stock 44,500 0
Retained earnings 179,560 118,885
Total liabilities andequity $ 534,551 $ 464,460
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2017
Sales $ 617,500
Cost of goods sold 292,000
Gross profit 325,500
Operating expenses
Depreciation expense $ 27,750
Other expenses 139,400 167,150
Other gains (losses)
Loss on sale of equipment (12,125 )
Income before taxes 146,225
Income taxes expense 34,050
Net income $ 112,175


Additional Information on Year 2017Transactions

The loss on the cash sale of equipment was $12,125 (details inb).

Sold equipment costing $67,875, with accumulated depreciation of$37,125, for $18,625 cash.

Purchased equipment costing $103,375 by paying $44,000 cash andsigning a long-term note payable for the balance.

Borrowed $4,700 cash by signing a short-term note payable.

Paid $53,625 cash to reduce the long-term notes payable.

Issued 3,200 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $51,500.

Problem 16-5AB Direct: Statement of cash flows LO P1,P3, P5

Required:
Prepare a complete statement of cash flows; report its operatingactivities according to the direct method.

[The following information applies to the questions displayedbelow.]

Forten Company, a merchandiser, recently completed itscalendar-year 2017 operations. For the year, (1) all sales arecredit sales, (2) all credits to Accounts Receivable reflect cashreceipts from customers, (3) all purchases of inventory are oncredit, (4) all debits to Accounts Payable reflect cash paymentsfor inventory, and (5) Other Expenses are paid in advance and areinitially debited to Prepaid Expenses. The company’s incomestatement and balance sheets follow.

FORTEN COMPANY
Comparative Balance Sheets
December 31, 2017 and 2016
2017 2016
Assets
Cash $ 75,400 $ 90,500
Accounts receivable 91,440 67,625
Inventory 301,156 268,800
Prepaid expenses 1,380 2,235
Total current assets 469,376 429,160
Equipment 140,500 125,000
Accum.depreciation—Equipment (45,125 ) (54,500 )
Total assets $ 564,751 $ 499,660
Liabilities andEquity
Accounts payable $ 70,141 $ 140,175
Short-term notes payable 15,100 9,400
Total current liabilities 85,241 149,575
Long-term notes payable 56,500 65,750
Total liabilities 141,741 215,325
Equity
Common stock, $5 par value 196,750 167,250
Paid-in capital in excess ofpar, common stock 54,500 0
Retained earnings 171,760 117,085
Total liabilities andequity $ 564,751 $ 499,660

FORTEN COMPANY
Income Statement
For Year Ended December 31, 2017
Sales $ 667,500
Cost of goods sold 302,000
Gross profit 365,500
Operating expenses
Depreciation expense $ 37,750
Other expenses 149,400 187,150
Other gains (losses)
Loss on sale of equipment (22,125 )
Income before taxes 156,225
Income taxes expense 48,050
Net income $ 108,175

Additional Information on Year 2017Transactions

The loss on the cash sale of equipment was $22,125 (details inb).

Sold equipment costing $97,875, with accumulated depreciation of$47,125, for $28,625 cash.

Purchased equipment costing $113,375 by paying $64,000 cash andsigning a long-term note payable for the balance.

Borrowed $5,700 cash by signing a short-term note payable.

Paid $58,625 cash to reduce the long-term notes payable.

Issued 4,200 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $53,500.

REQUIRED:

1. Prepare a complete statement of cash flows;report its operating activities using the indirect method.(Amounts to be deducted should be indicated with a minussign.)