Question

Foley Mountain Company Trial Balance 11/30/17 I cr Dr 112,000 127,000 1,000 50,000 65,000 62,000 75,000 0 32,000 106,000 12,000 22,000 45,000 0 Cash Accounts Receivable Allowance for Doubtful Accounts Short Term Note Receivable Supplies Inventory Equipment Building Accumulated Depreciation Copyright Accounts Payable Dividends Payable Interest Payable Unearned Revenue ST Note Payable LT Mortgage Payable Bonds Payable Premium on Bonds Payable Common Stock - $1.75 par Paid In Capital In Excess of Par-CS Preferred Stock - $5 par Paid In Capital In Excess of Par-PS Treasury Stock Retained Earnings Dividends Sales Revenue Sales Returns & Allowances Sales Discounts Cost of Goods Sold Bad Debts Expense Depreciation Expense Wages Expense Rent Expense Insurance Expense Supplies Expense Interest Revenue Interest Expense Gain on Sale of Equipment Income Tax Expense Total 125,000 16,840 175,000 86,000 1,000 50,000 0 3,500 2,000 480,160 10,000 3,000 46,000 30,000 26,000 160,000 98,000 25,000 16,000 1,000 6,500 15,000 46,000 1,065,500 1,065,500

Answer 1

Foley Mountain Company Journal entries Debit Credit Date Account 1-Dec Building $300,000 $ 300,000 LT Mortgage payable $ 25-Dec Cash 6,000 $ 1,750 1,000*1.75 Common Stock - $1.75 par Paid in Capital in Excess of Par- CS $4,250 $303,000 -(17,5000/1.75)+1,000) *3 $ 303,000 Op shares= $175,000/$1.75 =100,000 shares 29-Dec Dividends Dividends Payable 31-Dec LT Mortgage payable $ 1,800 $ 2,000 Interest expense 300,000*8%*1/12 $3,800 Cash 31-Dec Interest expense $ 600 45,000*8% 2/12 Interest Payable 600 31-Dec Interest expense (125,000+16,840) *8% balancing figure 11,347.20 Premium on Bonds Payable 1,152.80 $12,500 125,000*10% Interest Payable $ 12,000 31-Dec Unearned Revenue -22,000-10,000 $12,000 Sales Revenue $ -50 shares*$11 31-Dec Treasury Stock 550 $ Cash 550

Foley Mountain Company T Accounts Date Date Date Date Building $ Debit Credit Debit Credit Debit Credit Debit Credit Date Date Date Date Unearned Revenue Cash LT Mortgage payable Op bal Op bal 25-Dec $ $ 112,000 31-Dec $12,000 Op bal 31-Dec $ $ $2,000 3,800 Op bal 31-Dec $ 1,800 31-Dec $ 1-Dec $300,000 1-Dec $300,000 6,000 550 $ 113.650 $ 300,000 Bal. Bal. $298,200 $10,000 Bal. Bal. Common Stock - $1.75 par Paid in Capital in Excess of Par- CS $ 86,000 25-Dec $4,250 Dividends Interest Payable $ 2,000 Op bal 25-Dec $ $ 175,000 Op bal Op bal Op bal $ 31-Dec $ 29-Dec $303,000 1,750 600 31-Dec $12,500 Bal. $ 90,250 Bal Bal. $176,750 Bal. $305,000 $13,100 Dividends Payable Op bal Premium on Bonds Payable Treasury Stock $ 1,152.80 Op bal $ 16,840 Op bal $ 31-Dec 29-Dec $303,000 31-Dec $ 550 Bal. Bal. $303,000 15.687.20 Bal. 550 Sales Revenue Interest expense Op bal 31-Dec $12,000 $ 480,160 Op bal 6,500 31-Dec $ 2,000 31-Dec $ 600 31-Dec 11,347.20 $ 492,160 Bal. Bal. 20,447.20

Foley Mountain Company Trial Balance Debit Credit Accounts Cash 113,650.00 Accounts Receivable 127,000.00 Allowance for doubtful account 1,000.00 Short term Note receivable 50,000.00 Supplies 65,000.00 Inventory 62,000.00 Equipment 75,000.00 Building Accumulated Depreciation 300,000.00 32,000.00 Copyright Accounts Payable 106,000.00 12,000.00 Dividends Payable 303,000.00 Interest Payable 13,100.00 Unearned Revenue 10,000.00 ST Note Payable 45,000.00 LT Mortgage Payable 298,200.00 Bonds Payable Premium on Bonds Payable 125,000.00 15,687.20 Common Stock- $1.75 par 176,750.00 Paid in Capital in Excess of Par- CS 90,250.00 Preferred Stock- $5 par Paid in Capital in Excess of Par PS Treasury Stock Retained earnings 1,000.00 50,000.00 550.00 3,500.00 Dividends 305,000.00 Sales Revenue 492,160.00 Sales returns & allowances 10,000.00 Sales discounts 3,000.00 Cost of sales 46,000.00 Bad Debt expense 30,000.00 Depreciation expense 26,000.00 Wages expense 160,000.00 Rent expense 98,000.00 Insurance expense 25,000.00 Supplies expense 16,000.00 1,000.00 Interest Revenue Interest expense 20,447.20 Gain on sale of equipment 15,000.00 Income tax expense 46,000.00 Totals 1,684,647.20 1,684,647.20

LT Mortagage Payable balance after Jan 31, 2018 payment 296,388.00 #1 Calculation Monthly Payment Interest expense Principal Payment Ending Principal balance Principal Payment Ending Principal balance Interest expense 1-Dec-17 300,000 300,000*8%*1/12 = 3,800-2,000 - 298,200*8%*1/12 3,800-1,812 300,000-1,800 31-Dec-17 3,800 2,000 1,800 298,200 296,388 1-Jan-18 3,800 1,988 1,812 =298.200-1.812 Monthly Payment less Interest expense Expected receipts from sale (issuance) of bonds $ 2,154,434.70 #2 Amount Present Value (PV) Calculation PV of Interest $ 926,608.19 (2,000,000*12% *6/12) *(1-(1/(1+5%)^10))/5% $ 1,227,826.51 2,000,000/(1+59%)^10 $ 2,154,434.70 PV of Maturity amount Total Present Value 10% Interest rate - annual Interest rate semi annual (r) 5% -10%/2 Number of years 5 Number of periods (n) 10 -5 years*2 =Interest*(1-(1/(1+r)^n))/r =Maturity amount /(1+r) ^n PV of Interest PV of Maturity amount