Hult International Business School - London

Hult International Business School - London
– Individual Post Course Assignment
Course: Accounting EMBA 2019 / 2020
Lecturer: Alek Grzeszczak
Date: March 2020
Total Points: 240
Name:
Part 1 – INDIVIDUAL QUESTIONS
1. Journalizing transactions (10 points)
The following events occurred for Morgan Company:
a. Received investment of $52,000 cash by organizers and distributed stock to them.b . Purchased $18,000 of land; paid $3,000 in cash and signed a mortgage note for
the balance.
c
. Purchased $4,000 of equipment, paying $500 in cash and signing a note for the
rest.d. Borrowed $10,000 cash from a bank.e. Loaned $700 to an employee who signed a note.
Prepare journal entries.
2. Identifying Revenues. (13 points)
The following transactions occur in June 2019:
a. A popular food magazine company receives a total of $14,980 from subscribers.
The subscriptions begin in the next fiscal year. Answer from the magazine
company’s standpoint.b. On June 1, 2019, a bank lends $2,400 to a company; the note principal and $384
($2,400 x 16 percent) annual interest are due in one year. Answer from the bank’s
standpoint.c. Honda, Inc., sells a truck with a list, or “sticker,” price of $27,089 for $21,559 cash.d. Taryt department store orders 1,000 boy’s shirts for $12 each for future delivery
from T-shirt World Corporation. The terms require payment in full within 30 days of
delivery. Answer from T-shirt World’s standpoint.e. T-shirt World Corporation completes production of the shirts described in (
d) and
delivers the order. Answer from T-shirt World’s standpoint.f. T-shirt World Corporation receives payment from Taryt’s for the order described in
(
d). Answer from T-shirt World’s standpoint.
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g. A customer purchases a ticket from United Airlines for $322 cash to travel the
following January. Answer from United Airlines’ standpoint.h. BMW issues $20 million in new common stock.i. University of Miami receives $18,300,000 cash for 60,000 twelve-game season
football tickets.j. University of Miami plays the first football game referred to in (
i).k. Precision Builders signs a contract with a customer for the construction of a new
$500,000 warehouse. At the signing, Precision receives a check for $150,000 as a
deposit on the future construction. Answer from Precision’s standpoint.l. A customer orders and receives 72 MP3 players from Best Buy; the customer
promises to pay $9,000 within three months. Answer from Best Buy’s standpoint.m.Delights, a retail store, sells a $45 lamp to a customer who charges the sale on his
store credit card. Answer from Delights’ standpoint.
For each of the transactions, if revenue is to be recognized in June, indicate the
revenue account title and amount. If revenue is not to be recognized in June, explain
why.
3. Recording Adjusting Entries (10 points)
Lamar Marina repairs, stores, and cleans boats for customers. It is completing the accounting
process for the year just ended, November 30, 2019. The transactions during 2019 have been
journalized and posted. The following data with respect to adjusting entries are available:
a. Lamar borrowed $325,000 at a 12 percent annual interest rate on April 1, 2019, to expand its
boat
storage facility. The loan requires Lamar’s to pay the interest quarterly until the note is repaid in
three years. Lamar paid quarterly interest on July 1 and October 1.
b. The Young family paid Lamar $3,240 on November 1, 2019, to store its sailboat for the winter
until May 1, 2020. Lamar credited the full amount to Unearned Storage Revenue on November 1.
c. Lamar used boat-lifting equipment that cost $250,000; $25,000 was the estimated depreciation
for 2019.
d. Boat repair supplies on hand at December 1, 2018, totaled $17,500. Repair supplies purchased
and debited to Supplies during the year amounted to $44,000. The year-end count showed $10,400
of the supplies on hand.
e. Wages earned by employees during November 2019, unpaid and unrecorded at November 30,
2019, amounted to $3,950. The next payroll date will be December 5, 2019.
1. Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or
accrued expense.
2. Prepare the adjusting entries that should be recorded for Lamar at November 30, 2019.
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4. Inferring Stock Issuances and Cash Dividends from Changes in
Stockholders’ Equity (6 points)
The Corner Co. is a large retailer that processes food. Corner reported the following January 31
balances in its stockholders’ equity accounts (dollars in millions):
Current Year Prior Year
Common stock $ 925 $ 919
Paid-in capital 3,366 3,231
Retained earnings 8,489 5,480
During the current year, Corner reported net income of $3,249.
1. How much did Corner declare in dividends for the year?
2. Assume that the only other transaction that affected stockholders’ equity during the current year
was a single stock issuance. Recreate the journal entry reflecting the stock issuance.
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5. Preparing a Simple Statement of Cash Flows Using the Indirect
Method (16 points)
Nancy & Donald Corp. is preparing its annual financial statements as of December 31,
2019. Listed below are Balance Sheets for 2019 and 2018 as well as the Income
Statement for 2019. Cash Flow statement is missing.
Balance Sheets 2018 2019 Income Statement 2019
$ in millions $ in millions
Assets Net revenues 610
Cash 25 55 COGS 280
Accounts receivable 160 130 Depreciation expense 50
Prepaid Expense 10 30 Earnings before interest
Inventory 220 285 and taxes (EBIT) 280
Total Current Assets 415 500 Interest expense 20
Profit before tax 260
Net PP&E 485 600 Taxes paid 60
Total Assets 900 1100 Net income 200
Liabilities and equity Dividends declared and paid 100
Accounts payable 50 80
Notes payable 70 85
Other short term debt 40 55
Total Current Liabilities 160 220
Long-term debt 105 125
Shareholders’ equity
Common stock 240 260
Retained earnings 395 495
Total Shareholder's Equity 635 755
Total liabilities and equity 900 1100
A. Prepare (show the “waterfall”) the 2019 statement of cash flows for Nancy &
Donald Corp. (10 points)
B. What is the amount of cash flow from Operations for 2019 ? (2 points)
C. What is the amount of Free Cash Flow for 2019 ? (2 points)
D. What is the change in cash for 2019 ? (2 points)
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6. On March 3, 2019, Gooddeal.com sold merchandise for $2,500, terms
2/10 n/30. Prepare the journal entry. This merchandise originally cost
$2,000. (5 points)
Debit and credit the accounts affected
Mar. 3
On March 6, 2019, the customer returned $1,250 (or one-half) of the merchandise that
was purchased back on March 3. Prepare the journal entry. (5 points)
Debit and credit the accounts affected
Mar. 6
The customer paid for the merchandise on March 8, 2019, taking advantage of the
permitted discount. Prepare the journal entry. (3 points)
Debit and credit the accounts affected
Mar. 8
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7. Determine the effect of the following transactions on the identified
financial statement components and ratios. (8 points)
Code your answers as follows:
I: If the transaction results in an increase in the financial statement component or ratio.
D: If the transaction results in a decrease in the financial statement component or ratio.
N: If the transaction does not affect the financial statement component or ratio.
Transaction 1: A company issued common stock at a price in excess of par value.
Revenues _____
Assets _____
Stockholders' equity _____
Return on assets ratio _____
Transaction 2: A company recorded depreciation expense at year-end.
Net income _____
Assets _____
Stockholders' equity _____
Total asset turnover ratio _____
8. Recording and Reporting a Bad Debt Estimate Using Aging Analysis (6
points).
Columbia Company uses the aging approach to estimate bad debt expense. The balance of each
account receivable is aged on the basis of three time periods as follows:
(1) not yet due, $65,000,
(2) up to 180 days past due, $17,000, and
(3) more than 180 days past due, $6,000.
Experience has shown that for each age group, the average loss rate on the amount of the
receivables at year-end due to uncollectability is (1) 3 percent, (2) 12 percent, and (3) 32 percent,
respectively. At December 31, 2019 (end of the current year), the Allowance for Doubtful
Accounts balance is $300 (credit) before the end-of-period adjusting entry is made.
1. Prepare the appropriate bad debt expense adjusting entry for the year 2019.
2. Show how the various accounts related to accounts receivable should be shown on the
December 31, 2019, balance sheet.
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