ACC-1B Lecture Notes - Lecture 3: Retained Earnings, Common Stock, Deferral

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lemonwasp425

7 Jun 2020

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Accounts payable= business may purchase goods and services in exchange of a promise of future payment. Such purchases are said to be made on credit or on acct. Notes payable=represents amounts businesses must pay because it signed promissory notes. Accrued liabilitues= expense that has been incurred but has not yet been paid. Payable, interest payable, salaries payable, etc stockholders equity. Common stock= investment of assets, usually cash, the stockholders have invested into a business in exchange for the company"s stock. Retained earnings= cumulative earnings of the business since it began, less any dividends given to stock holders. Revenues = increases in retained earnings created by selling goods or services to customers. This account reps amounts earned by the company even if the company even if the company has not been paid for goods/services provided. A business may have several revenue accounts; Expenses= decreases in retained earnings from using resources to deliver goods and services to customers.

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Cougar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following:


Cash	$	28,000	Accounts payable	$	20,000
Investments (short-term)		2,000	Accrued liabilities payable		3,400
Accounts receivable		3,200	Notes payable (short-term)		6,200
Inventory		29,000	Notes payable (long-term)		45,000
Notes receivable (long-term)		2,500	Common stock		10,600
Equipment		51,000	Additional paid-in capital		95,400
Factory building		104,000	Retained earnings		43,600
Intangibles		4,500

During the current year, the company had the following summarized activities:

Purchased short-term investments for $7,300 cash.

Lent $5,400 to a supplier who signed a two-year note.

Purchased equipment that cost $25,000; paid $4,300 cash and signed a one-year note for the balance.

Hired a new president at the end of the year. The contract was for $84,000 per year plus options to purchase company stock at a set price based on company performance.

Issued an additional 2,500 shares of $0.50 par value common stock for $16,000 cash.

Borrowed $11,000 cash from a local bank, payable in three months.

Purchased a patent (an intangible asset) for $1,600 cash.

Built an addition to the factory for $25,000; paid $8,700 in cash and signed a three-year note for the balance.

Returned defective equipment to the manufacturer, receiving a cash refund of $1,800.

5. Prepare a classified balance sheet at December 31 of the current year.

COUGAR PLASTICS COMPANY
Balance Sheet

Assets		Liabilities






			0
	0

			0
		Stockholders' Equity




	0		0
	$0		$0

skyclam660

1. A corporation borrowed $130,000 cash by signing a 5-year, 9%installment note requiring equal annual payments each December 31of $33,422. What journal entry would the issuer record for thefirst payment?

Debit Interest Expense $11,700; debit Notes Payable $21,722;credit Cash $33,422.

Debit Notes Payable $33,422; credit Cash $33,422.

Debit Notes Payable $33,422; debit Interest Payable $11,700;credit Cash $45,122.

Debit Notes Payable $11,700; credit Cash $11,700.

Debit Interest Expense $7,422; debit Notes Payable $26,000;credit Cash $33,422.

2. On January 1, a company issues bonds dated January 1 with apar value of $380,000. The bonds mature in 5 years. The contractrate is 7%, and interest is paid semiannually on June 30 andDecember 31. The market rate is 6% and the bonds are sold for$396,210. The journal entry to record the issuance of the bondis:

Debit Cash $396,210; credit Premium on Bonds Payable $16,210;credit Bonds Payable $380,000.

Debit Cash $380,000; debit Premium on Bonds Payable $16,210;credit Bonds Payable $396,210.

Debit Bonds Payable $380,000; debit Bond Interest Expense$16,210; credit Cash $396,210.

Debit Cash $396,210; credit Bonds Payable $396,210.

Debit Cash $396,210; credit Discount on Bonds Payable $16,210;credit Bonds Payable $380,000.

3. A company has earnings per share of $10.00. Its dividend pershare is $.70, its market price per share is $129.00, and its bookvalue per share is $105. Its price-earnings ratio equals:

4. Wiggins Company has 1,300 shares of $100 par preferred stock.It also has 28,000 shares of common stock outstanding, and itstotal stockholders' equity equals $586,400. The book value percommon share is:

$20.94.

$100.00.

$15.58.

$20.01.

$16.30.

5. A corporation issued 7,300 shares of $10 par value commonstock in exchange for some land with a market value of $116,000.The entry to record this exchange is:

6. The following data has been collected about Keller Company'sstockholders' equity accounts:

Common stock $10 par value 21,000 shares authorized and 10,500 shares issued, 1,100 shares outstanding	$105,000
Paid-in-capital in excess of par value, commonstock	51,000
Retained earnings	26,000
Treasury stock	12,760

Assuming the treasury shares were all purchased at the sameprice, the number of shares of treasury stock is:

10.

105,000.

9,400.

51,000.

26,000.

skymanatee165

Exercise 3-2 Blossom Company entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $33,500 in the business in exchange for common stock of the company 2. Purchased computers for office use for $27,200 from Ladd on account. 3. Paid $3,700 cash for May rent on storage space. 4. Performed computer services worth $18,000 on account. 5. Performed computer services for Wharton Construction Company for $3,200 cash. 6. Paid Western States Power Co. $8,900 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $1,700 on account. 9. Received $13,700 cash from customers for contracts billed in (4). Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholdersâ Equity in the far right column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-3 for example.) Assets = Liabilities + Stockholdersâ Equity Cash + Accounts Receivable + Equipment = Accounts Payable + Common Stock + Retained Earnings Revenues - Expenses (1) $ $ $ $ $ $ $ (2) (3) (4) (5) (6) (7) (8) (9) $ $ $ = $ $ $ $

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ACC-1B Lecture Notes - Lecture 3: Retained Earnings, Common Stock, Deferral

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