Problem

Sources of equity, journalizing stock issuance, and calculating book value per share [20-2...

Sources of equity, journalizing stock issuance, and calculating book value per share [20-25 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 11. After issuing the bonds in Chapter 11, Draper decides to raise additional capital for the planned business expansion by issuing 20,000 additional no par common shares for $40,000 and by issuing 3,000, 6%, $80 par preferred shares at $100 per share.

Requirements

1. Assuming total stockholders’ equity is $18,165 and includes 100 shares of common stock and 0 shares of preferred stock issued and outstanding immediately before the previously described transactions, journalize the entry related to the issuances of both common and preferred shares.
2. Calculate book value per preferred and book value per common share after the issuance.

Describe bonds and journalize transactions for bonds payable using the straight-line method. [20-30 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 10. Draper Consulting, Inc., is considering raising additional capital. Draper plans to raise the capital by issuing $400,000 of 8%, seven-year bonds on March 1, 2012. The bonds pay interest semiannually on March 1 and September 1. On March 1, 2012, the market rate of interest required by similar bonds by investors is 10%.

Requirements

1. Will Draper’s bonds issue at par, a premium, or a discount?
2. Calculate and record the cash received on the bond issue date.
3. Journalize the first interest payment on September 1 and amortize the premium or discount using the straight-line interest method.
4. Journalize the entry required, if any, on December 31 related to the bonds.

Accounting for liabilities of a known amount [15-20 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 9. Refer to Problem of Chapter 2. Draper Consulting, Inc., believes the company will need to borrow $300,000 in order to expand operations. Draper consults the bank and secures a 10%, five-year note on March 1, 2013. Draper must pay the bank principal in 5 equal installments plus interest annually on March 1.

Requirements

1. Record the $300,000 note payable on March 1, 2013.
2. Record the entry to accrue interest due on the note at December 31, 2013.
3. Record the entry Draper would make to record the payment to the bank on March 1, 2014.

Calculating and journalizing partial year depreciation [10-15 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 8. Refer to Problem of Chapter 2. In Chapter 2, we learned that Draper Consulting, Inc., had purchased a Dell computer, $1,800, and office furniture, $4,200 on December 3 and 4, respectively, and that they were expected to last five years.

Requirements

1. Calculate the amount of depreciation for each asset for the year ended December 31, 2012, assuming both assets are using straight-line depreciation.
2. Record the entry for the one month’s depreciation. Date it December 31, 2012.

Accounting for uncollectible accounts using the allowance method [15-20 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 7. Draper reviewed the receivables list from the January transactions (from Chapter 6). Draper identified on February 15 that a customer was not going to pay his receivable of $200 from December 9. Draper uses the allowance method for receivables, estimating uncollectibles to be 5% of January credit sales.

Requirements

1. Journalize the entry to record and establish the allowance using the percentage method for January credit sales.
2. Journalize the entry to record the identification of the customer’s bad debt.

Preparing a bank reconciliation and journal entries [20-25 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 6. Draper performs systems consulting. Draper’s February Cash from its general ledger is as follows:

Cash
Jan 31 Bal	23,115	ck207	4,300 Feb 1
Feb 6	2,930	ck208	825 Feb 14
Feb 13	2,800	ck209	1,455 Feb 14
Feb 20	4,800	ck210	190 Feb 28
Feb 27	3,690	ck211	550 Feb 28
Feb 28 Unadj Bal	30,015

Draper’s bank statement dated February 28, 2013, follows:

Requirements

1. Prepare the February bank reconciliation.
2. Journalize and post any transactions required from the bank reconciliation. Key all items by date. Compute each account balance, and denote the balance as Bal.

Accounting for inventory using the perpetual system—LIFO [30-40 min]

This problem continues the Draper Consulting, Inc., situation from Problem in Chapter 5. Consider the January transactions for Draper Consulting that were presented in Chapter 5. (Cost data has been removed from the sale transactions.)

Jan 2	Completed a consulting engagement and received cash of $7,800.
2	Prepaid three months’ office rent, $1,650.
7	Purchased 80 units software inventory on account, $1,680, plus freight in, $80.
18	Sold 40 software units on account, $3,500.
19	Consulted with a client for a fee of $1,000 on account.
20	Paid employee salary, $2,055.
21	Paid on account, $1,760.
22	Purchased 240 units software inventory on account, $6,240.
24	Paid utilities, $250.
28	Sold 120 units of software for cash, $4,680.
31	Recorded the following adjusting entries: Accrued salary expense, $685. Depreciation, $100 (Equipment, $30; Furniture, $70). Expiration of prepaid rent, $550. Physical count of inventory, 145 units.

Requirements

1. Prepare perpetual inventory records for January for Draper using the LIFO perpetual method. (Note: You must figure cost on the 18th, 28th, and 31st.)
2. Journalize and post the January transactions using the perpetual inventory record created in requirement 1. Key all items by date. Compute each account balance, and denote the balance as Bal.
3. Journalize and post the adjusting entries. Denote each adjusting amount as Adj. After posting all adjusting entries, prove the equality of debits and credits in the ledger.

Journalizing purchase and sale transactions—perpetual inventory; making closing entries, and preparing financial statements [30-40 min]

This problem continues the Draper Consulting, Inc., situation from Problem of Chapter 4. Draper performs systems consulting. Draper has also begun selling accounting software. During January, Draper Consulting completed the following transactions:

Jan 2	Completed a consulting engagement and received cash of $7,800.
2	Prepaid three months office rent, $1,650.
7	Purchased 80 units software inventory on account, $1,680, plus freight in, $80
18	Sold 40 software units on account, $3,500 (Cost $880).
19	Consulted with a client for a fee of $1,000 on account.
20	Paid employee salary, $2,055.
21	Paid on account, $1,760.
22	Purchased 240 units software inventory on account, $6,240.
24	Paid utilities, $250.
28	Sold 120 units software for cash, $4,680 (cost $2,960).
31	Recorded the following adjusting entries: Accrued salary expense, $685 Depreciation, $100 (Equipment, $30; Furniture, $70) Expiration of prepaid rent, $550 Physical count of inventory, 145 units, $3,770

Requirements

1. Open the following selected T-accounts in the ledger: Cash, Accounts receivable, Software inventory, Prepaid rent, Accumulated depreciation, Accounts payable, Salary payable, Common stock, Retained earnings, Dividends, Income summary, Service revenue, Sales revenue, Cost of goods sold, Salary expense, Rent expense, Utilities expense, and Depreciation expense.
2. Journalize and post the January transactions. Key all items by date. Compute each account balance, and denote the balance as Bal.
3. Journalize and post the closing entries. Denote each closing amount as Clo. After posting all closing entries, prove the equality of debits and credits in the ledger.
4. Prepare the January income statement of Draper Consulting. Use the singlestep format.

Start from the posted T-accounts and the adjusted trial balance that Draper Consulting prepared for the company at December 31:

Requirements

1. Complete the accounting worksheet at December 31.
2. Journalize and post the closing entries at December 31. Denote each closing amount as Clo and an account balance as Bal.
3. Prepare a classified balance sheet at December 31.

Journalizing transactions, posting to T-accounts, and preparing a trial balance [40-50 min] Problem continues with the consulting business of Carl Draper, begun in Problem Here you will account for Draper Consulting’s transactions as it is actually done in practice.

Draper Consulting, Inc., began operations and completed the following transactions during the first half of December:

Dec 2	Received $18,000 cash and issued 100 shares of no-par common stock.
2	Paid monthly office rent, $550.
3	Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.
4	Purchased office furniture on account, $4,200. The furniture should last for five years.
5	Purchased supplies on account, $900.
9	Performed consulting service for a client on account, $1,500.
12	Paid utility expenses, $250.
18	Performed service for a client and received cash of $1,100.

Requirements

1. Analyze the effects of Draper Consulting’s transactions on the accounting equation. Use the format of Exhibit and include these headings: Cash, Accounts receivable, Supplies, Equipment, Furniture, Accounts payable, Common stock, and Retained earnings.
2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.
3. Prepare the statement of retained earnings for the month ended December 31, 2012.
4. Prepare the balance sheet at December 31, 2012.

Draper Consulting, Inc., began operations and completed the following transactions during the first half of December:

Dec 2	Received $18,000 cash and issued 100 shares of no-par common stock.
2	Paid monthly office rent, $550.
3	Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.
4	Purchased office furniture on account, $4,200. The furniture should last for five years.
5	Purchased supplies on account, $900.
9	Performed consulting service for a client on account, $1,500.
12	Paid utility expenses, $250.
18	Performed service for a client and received cash of $1,100.

Requirements

1. Analyze the effects of Draper Consulting’s transactions on the accounting equation. Use the format of Exhibit, and include these headings: Cash, Accounts receivable, Supplies, Equipment, Furniture, Accounts payable, Common stock, and Retained earnings.
2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.
3. Prepare the statement of retained earnings for the month ended December 31, 2012.
4. Prepare the balance sheet at December 31, 2012.

Analysis of Transactions, Smart Touch Learning, Inc.

Draper Consulting, Inc., began operations and completed the following transactions during the first half of December:

Dec 2	Received $18,000 cash and issued 100 shares of no-par common stock.
2	Paid monthly office rent, $550.
3	Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.
4	Purchased office furniture on account, $4,200. The furniture should last for five years.
5	Purchased supplies on account, $900.
9	Performed consulting service for a client on account, $1,500.
12	Paid utility expenses, $250.
18	Performed service for a client and received cash of $1,100.

Requirements

1. Analyze the effects of Draper Consulting’s transactions on the accounting equation. Use the format of Exhibit and include these headings: Cash, Accounts receivable, Supplies, Equipment, Furniture, Accounts payable, Common stock, and Retained earnings.
2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.
3. Prepare the statement of retained earnings for the month ended December 31, 2012.
4. Prepare the balance sheet at December 31, 2012.

Draper Consulting, Inc., began operations and completed the following transactions during the first half of December:

Dec 2	Received $18,000 cash and issued 100 shares of no-par common stock.
2	Paid monthly office rent, $550.
3	Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.
4	Purchased office furniture on account, $4,200. The furniture should last for five years.
5	Purchased supplies on account, $900.
9	Performed consulting service for a client on account, $1,500.
12	Paid utility expenses, $250.
18	Performed service for a client and received cash of $1,100.

Requirements

1. Analyze the effects of Draper Consulting’s transactions on the accounting equation. Use the format of Exhibit, and include these headings: Cash, Accounts receivable, Supplies, Equipment, Furniture, Accounts payable, Common stock, and Retained earnings.
2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.
3. Prepare the statement of retained earnings for the month ended December 31, 2012.
4. Prepare the balance sheet at December 31, 2012.

Analysis of Transactions, Smart Touch Learning, Inc.