5. The company last paid interest on the ST note payable on November 30, 2012. Record the accrued interest expense for the last 1 month of 2012. The annual interest rate is 8%.

Finance Basics
Financial Statement Homework

Part 1: At November 30, 2012, Silver Traders Company had the following trial balance. There is detailed information on the next page about December 2012 transactions that need to be recorded.

Silver Traders Company Trial Balance 11/30/12

Dr

Cr

Cash

281,000

Accounts Receivable

62,000

Allowance for Doubtful Accounts

5,000

Short Term Note Receivable

24,000

Supplies

6,000

Inventory

65,000

Equipment

195,000

Building

0

Accumulated Depreciation

75,000

Copyright

44,000

Accounts Payable

45,000

Dividends Payable

0

Interest Payable

0

Unearned Revenue

40,000

ST Note Payable

15,000

LT Mortgage Payable

0

Bonds Payable

200,000

Premium on Bonds Payable

26,840

Common Stock – $1 par

3,000

Paid In Capital In Excess of Par – CS

86,000

Preferred Stock – $5 par

1,000

Paid In Capital In Excess of Par – PS

50,000

Treasury Stock

0

Retained Earnings

105,000

Dividends

5,000

Sales Revenue

819,000

Sales Returns & Allowances

3,840

Sales Discounts

9,000

Cost of Goods Sold

380,000

Bad Debts Expense

5,000

Depreciation Expense

50,000

Wages Expense

260,000

Rent Expense

63,000

Insurance Expense

16,000

Supplies Expense

6,000

Interest Revenue

1,000

Interest Expense

8,000

Gain on Sale of Equipment

15,000

Income Tax Expense

4,000

Total

1,486,840

1,486,840

Instructions: You must turn in the work performed on the sheets printed with this page. This WILL NOT BE ACCEPTED ON PLAIN PAPER.

  • Write the journal entries (on the following General Journal page) required for each of the events described below. Write the entries in the order described below (#1 – #8).
  • Use ONLY the accounts listed on the trial balance for your journal entries.
  • Post the transactions to individual T-accounts and prepare an adjusted trial balance for Silver Traders Company as of December 31, 2012.

1. The company purchased a building December 1, 2012 with a LT Mortgage Payable of $200,000 at 12% interest. (Record the purchase of the building.)

2. The company issued 500 shares of Common Stock for $4,000 on December 25, 2012. (Hint: Remember to consider the par value per share!)

3. On December 29, 2012 the company declared a cash dividend of $2.00 per share of common stock (including the additional 500 shares issued on December 25th.)

4. The terms of the LT mortgage payable from #1 above require the company to make monthly installment payments over the term of the loan. Each payment consists of interest on the unpaid balance of the loan and a reduction of loan principal. Record the first monthly payment of $3,000 on the LT Mortgage Payable on December 31, 2012.

5. The company last paid interest on the ST note payable on November 30, 2012. Record the accrued interest expense for the last 1 month of 2012. The annual interest rate is 8%.

6. The Bonds Payable and related Premium amounts on the Nov. trial balance relate to the Jan. 1, 2012 issuance of the following bonds: On Jan. 1, 2012, the company issued 10%, 10-year bonds when the market rate for similar investments was 8%. The company pays interest each year on January 1st. On Dec. 31, 2012, use the effective interest method of amortizing the premium on bonds payable to accrue the interest expense for 2012. Round your interest expense calculation to the nearest whole  dollar.

7. The Unearned Revenue amount on the Nov. trial balance relates to amounts that the company previously collected in cash for sales that were to be completed in the future. The company completed some of these sales during December and now owes only $15,000 of that unearned revenue. Record the necessary adjustment for December 31, 2012.

8. On December 31, 2012, the company purchased 50 shares of its own Preferred Stock for Treasury Stock for $12 per share.

1. What is the effect on the accounting equation when Treasury Stock is purchased? Assets = Liabilities + Stockholders’ Equity ______ = _______  + _______  (fill in blanks with arrows to indicate what changes and in which direction).

2. How many Common Stock shares are outstanding at 12/31/2012? (HINT: Remember that the treasury shares purchased on 12/31/2012 were Preferred Shares, not Common Shares)

3. If this company had a common stock 3-1 stock split on Dec. 31, 2012:

a. How many shares would there be after the split?

b. What is the par value per share in dollars after the split?

4. Does the Carrying Value of the Bonds Payable and Premium increase or decrease over the life of the bonds?

5. What will be the balance in the Mortgage Payable Account at Jan. 31, 2013 after the second monthly payment is made?

6. The company is about to issue $2,000,000 of 5-year, 10% bonds. Interest will be paid semi-annually. The market interest rate for such securities is 12%. How much can the company expect to receive from the sale (issuance) of these bonds?

Part 2: This is a DIFFERENT COMPANY. Using the trial balance below, complete the Multi-Step Income Statement and prepare the Statement of Retained Earnings and Classified Balance Sheet on the pages which follow. To get full credit you must include all critical subtotals.

Jackson Company Adjusted Trial Balance December 31, 2015

DEBIT

CREDIT

Cash

3,800

Accounts Receivable

4,920

Allowance for Doubtful Accounts

1,340

Short term Note Receivable

400

Interest Receivable

40

Supplies

60

Inventory

6,000

Prepaid Expenses

300

Equipment

21,440

Accumulated Depreciation

3,940

Copyrights

1,200

Accounts Payable

1,340

Interest Payable

40

Unearned Revenue

100

Long Term Note Payable

2,800

Common Stock

15,200

Paid-in-Capital In Excess of Par – CS

1,600

Retained Earnings (1/1/15)

6,320

Dividends

1,200

Sales

73,600

Sales Returns & Allowances

80

Sales Discounts

120

Cost of Goods Sold

44,400

Bad debt expense

60

Depreciation Expense

1,540

Amortization Expense

140

Wages Expense

16,000

Rent Expense

1,000

Office Expense

160

Supplies Expense

200

Selling Expense

1,600

Interest Expense

400

Interest Revenue

300

Income Tax Expense

1,520

Totals

106,580

106,580

Attachment:- Financial Statement Homework.rar

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