ACFI 305 Study Guide - Midterm Guide: Retained Earnings, Contingent Liability, Capital Structure
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Required:
1. Open T-accounts for the listed accounts, inserting their unadjustedJune 30, 2014, balances.
2. Post the June 30, 2014, adjusting entries to the T-accounts opened.Round all amounts to the nearest whole dollar.
3. Prepare the liability section ofShell Storage Unitsâ balance sheet at June 30, 2014
The general ledger of Shell Storage Units at June 30, 2014, theend of the companyâs fiscal year, includes the following accountbalances before adjusting entries.
Notes Payable,Short-Term $20,000
AccountsPayable $235,620
Current Portion of Long-term Debt payable
Interest Payable
Salaries payable
Employee Income Tax Payable
Employer Payroll Costs Payable
Employee Insurance Benefits Payable
Estimated Vacation Pay Liability $12,360
Sales Tax and GSTPayable $5972
Unearned RentRevenue $18,000
Long-Term DebtPayable $250,000
The additional data needed to develop the adjusting entries atJune 30 are as follows:
A) The$20,000 short-term note payable was issued on February 28. Itmatures six months from data of issuance and bears interest at6%.
B) Thelong-term debt is payable in annual installments of $50,000 withthe next installment due on August 31. On that date, Shell StorageUnits will also pay one yearâs interest at 3%. Interest was lastpaid August 31 of the preceding year.
C) GrossSalaries for the last payroll of the fiscal year were $6328. Ofthis amount, employee payroll withholdings payable were $1365 andsalary payable was $4963.
D) Employer Payroll Costs Payable was $820, and Shell Storageâsliability for employee health insurance was $991.
E) ShellStorage estimates that vacation pay expense is 6% of gross salariesof $147,500 (the $147,500 includes the last payroll of the fiscalyear).
F) On March 1, the company collected one yearâs rent of $18,000 inadvance.
G) At June 30,Shell Storage is the defendant in a $200,000 lawsuit, which thecompany expects to win. However, the outcome is uncertain.
Notes Payable, |
| Current Portion of Long- | |||||
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Interest Payable | Salaries Payable | Employee Income Tax Payable | |||||
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Employer Payroll Costs Payable | Employee Insurance Benefits | Estimated Vacation | |||||
Sales Tax and |
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The following are the transactions relating to the formation ofCardinal Mowing Services, Inc., and its first month ofoperations. |
| a. | The firm was organized and the initial stockholders investedcash of $780. |
| b. | The company borrowed $1,170 from a relative of one of theinitial stockholders; a short-term note was signed. |
| c. | Two zero-turn lawn mowers costing $624 each and a professionaltrimmer costing $169 were purchased for cash. The original listprice of each mower was $793, but a discount was received becausethe seller was having a sale. |
| d. | Gasoline, oil, and severalpackages of trash bags were purchased for cash of $117. |
| e. | Advertising flyers announcing the formation of the business anda newspaper ad were purchased. The cost of these items, $221, willbe paid in 30 days. |
| f. | During the first two weeks of operations, 47 lawns were mowed.The total revenue for this work was $917; $605 was collected incash, and the balance will be received within 30 days. |
| g. | Employees were paid $546 fortheir work during the first two weeks. |
| h. | Additional gasoline, oil, andtrash bags costing $143 were purchased for cash. |
| i. | In the last two weeks of thefirst month, revenues totaled $1,196, of which $488 wascollected. |
| j. | Employee wages for the last twoweeks totaled $663; these will be paid during the first week of thenext month. |
| k. | It was determined that at theend of the month the cost of the gasoline, oil, and trash bagsstill on hand was $39. |
| l. | Customers paid a total of $195 due from mowing services providedduring the first two weeks. The revenue for these services wasrecognized in transaction f. |
| Required: |
| Prepare the journal entries for above of the transactions. Journal entry options include: Accounts payable Accounts receivable Accumulated depreciation Additional paid-in capital Advertising expense Allowance for bad debts Apicâpreferred Bad debts expense Bonds payable Buildings Capital lease liability Cash Commissions expense Commissions payable Cost of goods sold Current maturities of long-term debt Deferred income taxes Deferred tax liabilities Depreciation expense Discount on bonds payable Discount on notes payable Dividends payable Employee contributions to pension plan Equipment Estimated health care expense Estimated liability for retiree health care--current Estimated warranty liability Federal unemployment taxes withheld Fica taxes withheld Gain on sale of equipment Goodwill Group hospitalization insurance Income tax expense Income taxes payable Income taxes withheld Insurance expense Interest expense Interest income Interest payable Interest receivable Interest revenue Inventory Keg deposits Keg deposits revenue Keg expense Land Loss of sale of equipment Loss on early retirement of bonds Loss on sale of machine Machine Medical insurance contributions Merchandise inventory Miscellaneous expense Note payable Note receivable Paid-in capital Parts inventory Payroll tax expense Payroll taxes payable Preferred stock Premium on bonds payable Prepaid insurance Prepaid rent Real estate tax expense Real estate taxes payable Rent expense Rent payable Rent revenue Retained earnings Serial bonds payable Service revenue Subscription revenue Supplies Supplies expense Supplies on hand Ticket revenue Treasury stock Trucks Unearned rent revenue Unearned revenues Unearned subscription revenue Unearned ticket revenue Utilities expense Wages expense Wages payable Warranty expense Withholding liabilities and each journal entry is either credit ordebit.!!!! |
what is the operating efficiency of the firm using the below data
| As Reported Annual Balance Sheet | |||
| Report Date | 12/31/2013 | 01/01/2013 | |
| Currency | USD | USD | |
| Audit Status | Not Qualified | Not Qualified | |
| Consolidated | Yes | Yes | |
| Cash & cash equivalents | 32386000 | 31486000 | |
| Restricted cash | - | 205000 | |
| Receivables, gross | 14401000 | 11430000 | |
| Less: allowance for doubtful accounts | 291000 | 103000 | |
| Receivables, net | 14110000 | 11327000 | |
| Inventories | 2670000 | 3143000 | |
| Prepaid & refundable income taxes | 483000 | 655000 | |
| Prepaid rent | 307000 | 3080000 | |
| Prepaid expenses & other current assets | 6727000 | 1681000 | |
| Total current assets | $56,683,000.00 | 51577000 | |
| Leasehold improvements | 49532000 | 50358000 | |
| Furniture, fixtures & equipment | 57529000 | 57457000 | |
| Construction in progress (primarily stores under construction) | 164000 | 79000 | |
| Property, fixtures & equipment, gross | 107225000 | 107895000 | |
| Less accumulated depreciation & amortization | 69740000 | 69452000 | |
| Property, fixtures & equipment, net | 37485000 | 38442000 | |
| Goodwill | 1233000 | 1336000 | |
| Trademarks & other intangible assets, net | 1317000 | 1412000 | |
| Notes receivable | 300000 | - | |
| Deposits & other long-term assets | 898000 | 846000 | |
| Total other long-term assets | 1198000 | 846000 | |
| Total assets | 97916000 | 93613000 | |
| Accounts payable | 5086000 | 8206000 | |
| Accrued compensation & benefits | 5538000 | 7566000 | |
| Workers' compensation & health insurance reserves | 1046000 | 1087000 | |
| Accrued jambacard liability | 37121000 | 33634000 | |
| Other current liabilities | 13082000 | 9728000 | |
| Total current liabilities | $61,873,000.00 | 60221000 | |
| Deferred rent | 4033000 | 5610000 | |
| Deferred revenue | 2598000 | 2292000 | |
| Construction allowance | 1359000 | 2382000 | |
| Contingent consideration | 553000 | 894000 | |
| Other liabilities | 658000 | 702000 | |
| Deferred rent & other long-term liabilities | 9201000 | 11880000 | |
| Total liabilities | 71074000 | 72101000 | |
| Series B redeemable preferred stock | - | 7916000 | |
| Common stock | 17000 | 78000 | |
| Additional paid-in capital | 391234000 | 380007000 | |
| Retained earnings (accumulated deficit) | -364409000 | -3.66E+08 | |
| Total stockholders' equity | 26842000 | 13596000 |
| Currency | USD | USD | |
| Audit Status | Not Qualified | Not Qualified | |
| Consolidated | Yes | Yes | |
| Net income (loss) | 2080000 | 302000 | |
| Depreciation & amortization | 10974000 | 11062000 | |
| Impairment of long-lived assets | 728000 | 711000 | |
| Lease termination, store closure costs & disposals | -3308000 | 820000 | |
| Loss (gain) from sale of investment in joint venture | - | -545000 | |
| Contingent consideration fair value measurement | -651000 | -57000 | |
| Jambacard breakage income & amortization, net | -3177000 | -4275000 | |
| Share-based compensation | 2550000 | 2091000 | |
| Bad debt & purchase obligation reserves | - | 600000 | |
| Bad debt, purchase obligation reserves & trade credits | 645000 | - | |
| Deferred rent | -1186000 | -1138000 | |
| Equity loss (income) from joint ventures | - | -70000 | |
| Receivables | -2998000 | 1637000 | |
| Inventories | -157000 | -1348000 | |
| Prepaid & refundable taxes | 172000 | -319000 | |
| Prepaid rent | 2773000 | -81000 | |
| Prepaid expenses & other current assets | -2842000 | -172000 | |
| Other long-term assets | 243000 | -215000 | |
| Restricted cash from operating activities | 205000 | 1147000 | |
| Accounts payable | -2809000 | 3115000 | |
| Accrued compensation & benefits | -2028000 | 1000000 | |
| Workers' compensation & health insurance reserves | -41000 | -5000 | |
| Accrued jambacard liability | 6664000 | 4653000 | |
| Other current liabilities | 2387000 | -517000 | |
| Other long-term liabilities | 246000 | -828000 | |
| Net cash flows from operating activities | 10470000 | 17568000 | |
| Capital expenditures | -1.5E+07 | -5249000 | |
| Business acquisition | - | -390000 | |
| Purchase of investment | -300000 | - | |
| Proceeds from the sale of stores | 4777000 | 4000 | |
| Proceeds from sale of investment in joint venture | - | 1032000 | |
| Capital distributions from investment, net | - | 105000 | |
| Net cash flows from investing activities | -1E+07 | -4498000 | |
| Proceeds pursuant to stock plans | 822000 | 98000 | |
| Redeemable preferred stock dividends paid | -158000 | -1289000 | |
| Net cash flows from financing activities | 664000 | -1191000 | |
| Net increase (decrease) in cash & equivalents | 900000 | 11879000 | |
| Cash & equivalents at beginning of period | 31486000 | 19607000 | |
| Cash & equivalents at end of period | 32386000 | 31486000 | |
| Cash paid for interest | 51000 | 168000 | |
| Income taxes paid | 187000 | 277000 |
| Report Date | 12/31/2013 | 01/01/2013 | |
| Currency | USD | USD | |
| Audit Status | Not Qualified | Not Qualified | |
| Consolidated | Yes | Yes | |
| Company stores | 2.13E+08 | 2.15E+08 | |
| Franchise & other revenue | 16362000 | 13664000 | |
| Total revenue | 2.29E+08 | 2.29E+08 | |
| Cost of sales | 52211000 | 50215000 | |
| Labor costs | 62015000 | 63086000 | |
| Occupancy costs | 29350000 | 29473000 | |
| Store operating expense | 34986000 | 33612000 | |
| Depreciation & amortization | 10974000 | 11062000 | |
| General & administrative expense | 37771000 | 40771000 | |
| Store pre-opening expense | 880000 | 604000 | |
| Impairment of long-lived assets | 728000 | 711000 | |
| Store lease termination & closure | 148000 | 421000 | |
| Other operating expense (income), net | -2182000 | -1779000 | |
| Total costs & operating expenses | 2.27E+08 | 2.28E+08 | |
| Income (loss) from operations | 2368000 | 613000 | |
| Interest income | 9000 | 61000 | |
| Interest expense | 242000 | 217000 | |
| Total other income (expense), net | -233000 | -156000 | |
| Income (loss) before income taxes | 2135000 | 457000 | |
| Current federal income taxes | -79000 | 81000 | |
| Current state income taxes | 27000 | 10000 | |
| Current foreign income taxes | 107000 | 64000 | |
| Total current income taxes | 55000 | 155000 | |
| Income tax expense (benefit) | 55000 | 155000 | |
| Net income (loss) | 2080000 | 302000 | |
| Redeemable preferred stock dividends & deemed dividends | 588000 | 2181000 | |
| Net income (loss) attributable to common stockholders | 1492000 | -1879000 | |
| Weighted average shares outstanding - basic | 16793235 | 14139888 | |
| Weighted average shares outstanding - diluted | 17222030 | 14139888 | |
| Year end shares outstanding | 17154655 | 15481782 | |
| Net income (loss) per share - basic | 0.09 | -0.15 | |
| Net income (loss) per share - diluted | 0.09 | -0.15 | |
| Total number of employees | 4000 | 4300 | |
| Number of common stockholders | 91 | 102 |
