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ACT3391 Troy University Statement of Cash Flows Questions Response

ACT3391 Troy University Statement of Cash Flows Questions Response

Question Description

I also included an attachment with the instructions.

37.

(2 points)

Acquiring a machine

.

a.

Geiger, a

publicly-traded

company, acquired a machine from Counter. Geiger gave Counter 10,000 shares of Geiger’s $1 par

value common stock in exchange for the machine. At the time of the aquisition, Geiger’s stock had a market value of $25 per

share. At the time of the acquisition, several appraisers valued the machine at $253,000. Prepare the entry Geiger should make

to record its acquisition of the machine.

b.

Tide, a

non-publicly-traded

company, acquired a machine from Roll. Tide gave Roll 10,000 shares of Tide’s $1 par value

common stock in exchange for the machine. At the time of the aquisition, Tide’s stock had a market value of $25 per share. At

the time of the acquisition, several appraisers valued the machine at $253,000. Prepare the entry Tide should make to record

its acquisition of the machine.

38.

(5 points) On 12-31-15, Acme purchased a machine. Acme signed a $800,000 zero-interest bearing note. The note is

payable in full on 12-31-17. Assume an acceptable interest rate on similar notes was 4%. On 12-31-15, Acme incurred and paid

$12,000 to have the machine installed in its sales office. In this problem, you can ignore depreciation – we’ll get to that in chapter 11.

Prepare the entries Acme should make related to this note on:

a.

12-31-15.

b.

12-31-16.

c.

12-31-17.

39.

(4 points) For each of the items below,

prepare the appropriate entry

.

1.

A motor in one of Excel’s trucks was overhauled at a cost of $4,000. Excel expects this overhaul will make the truck last longer,

i.e., the truck’s useful life will be extended.

2.

James, a maintenance worker at Excel, spent the entire week unloading and setting up a new machine in Excel’s factory. James’

earned $1,500 that week, however, James will not be paid until the following week. (Do not worry about any withholdings from

James’ pay.)

3.

Excel incurred and paid $1,600 for ordinary repairs on one of its machines.

4.

Excel incurred and paid $10,000 for adjustments to one of its machines. The adjustments will increase the efficiency of the

machine, i.e., the machine will be able to produce the same quantity of inventory items at a lower production cost.

2

40.

(9 points) B constructed a warehouse for its own use. B started construction on January 1 and completed construction on

December 31. Construction expenditures were as follows:

$350,000 on January 1

$420,000 on May 31

$250,000 on September 1

$140,000 on November 1

During the entire year B had the following outstanding notes payable:

A 5.00%, 5-year $8,000,000 note payable

A 4.50%, 7-year $4,000,000 note payable

A 3.00%, 4-year $5,000,000 note payable

a)

What were B’s total interest costs for the year?

b)

What amount of interest should B capitalize on this construction project?

c)

What was B’s interest expense for the year?

When necessary, round any interest rate as follows: 4.873% = 4.9% while 3.314% = 3.3%.

41.

(5 points) Leia Company purchased a machine for $10,000,000 on January 1, 2018. Leia estimates the machine will have

a five-year useful life, salvage value of $96,000, production capability of 800,000 units of a product called Hoosier, and 10,000

working hours. During 2018, Leia used the machine for 3,400 hours and the machine produced 275,000 units. Compute Leia’s

depreciation for 2018 assuming she uses the following depreciation methods:

a.

Straight-line

b.

Units-of-production

c.

Working hours

d.

Sum-of-the-years’ digits

e.

Double-declining balance

42.

(3 points) Evan Company purchased a machine for $500,000 on August 1, 2017. Evan estimates the machine will have a

ten-year useful life and a salvage value of $50,000. Evan calculates depreciation for a year to the nearest full month. Compute Evan’s

depreciation for 20

19

assuming he uses the following depreciation methods:

a.

Sum-of-the-years’ digits

b.

Double-declining balance

43.

(20 points) Diane’s balance sheets as of December 31, 2016 and 2017 are presented below:

2016

2017

Cash

$ 310,000

$ 443,456

Accounts receivable, net

300,000

430,000

Long-term notes receivable

0

100,000

Discount on long-term notes receivable

( 0)

( 17,356)

Property, plant, and equipment – at cost

750,000

950,000

Accumulated depreciation

( 325,000)

( 318,100)

TOTAL ASSETS

$1,035,000

$1,588,000

Accrued liabilities

$ 230,000

$ 175,000

Unearned revenues

220,000

310,000

Short-term debt

25,000

15,000

Common stock, $1 par value

60,000

110,000

Additional paid-in-capital

200,000

315,000

Retained earnings

300,000

663,000

TOTAL LIABILITIES & SE

$1,035,000

$1,588,000

Diane’s 2017 income statement is presented below:

Service revenues

$1,800,000

Other revenues and gains/losses, net

1,987

Selling, general, and administrative expenses

1,209,000

Interest expense

1,000

Income before income taxes

588,013

Income tax expense

125,013

Net income

$ 463,000

3

SELECTED

OTHER INFORMATION:

1.

On January 1, 2017, Diane provided services to a customer in exchange for a $100,000, zero interest bearing note

receivable. Diane will collect the note principal in full on January 1, 2020. The market rate of interest at the time of the sale

was 10%.

2.

During 2017, all other services provided by Diane were on a cash or short-term credit (AR) basis.

3.

During 2017, Diane declared and distributed a cash dividend.

4.

During 2017, Diane issued, in exchange for cash, 50,000 additional shares of her common stock.

5.

During 2017, Diane both bought and sold some PP&E. Diane uses the straight-line depreciation method on all of its PP&E

items and calculates depreciation to the nearest full-month. Diane assumes a $0 salvage value on each PP&E item. Diane’s

PP&E sales related to two items:

a.

A machine. Diane purchased the machine on 06-01-14 for $86,400. The machine had an eight-year useful life.

Diane sold the machine on 11-01-17 for $45,000.

b.

A building. When Diane purchased the building, she paid $100,000. Diane sold the building for $20,000. As a

result of the sale, Diane recorded a loss of $5,000.

6.

During 2017, Diane did NOT enter into any non-cash investing or financing activities.

Prepare Diane’s Statement of Cash Flows (in good form) for the year ended December 31, 2017. Diane uses the indirect method

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