
1.
Prepare for Company I the long-term liabilities section for the year ended December 31, 2019.
1.

Explanation of Solution
Retained earnings are that portion of profits which are earned by a company but not distributed to stockholders in the form of dividends. These earnings are retained for various purposes like expansion activities, or funding any future plans.
Prepare for Company I the long-term liabilities section for the year ended December 31, 2019.
Particulars | Amount in $ |
Long -term liabilities: | |
9% unsecured note payable to bank, due in annual principal instalments of $800,000, less current portion (1) | 3,200,000 |
11% debenture bonds payable due December 31, 2028, plus unamortized premium of $337,640 (2) | 5,337,640 |
Total long-term liabilities | 8,537,640 |
(Table 1)
Working notes:
(1) Calculation of 9% of notes payable to bank:
Particulars | Amount in $ |
9% of notes payable to bank: | |
Notes payable, 11/2/19 | $ 4,000,000 |
Deduct instalment due 11/2/20 | ($ 800,000) |
Long-term portion,12/31/19 | $ 3,200,000 |
(Table 2)
(2) Calculation of debenture on bonds payable:
Particulars | Amount in $ | Amount in $ |
Carrying amount, 12/31/18 | 5,352,400 | |
Deduct amortization of bond premium: | ||
Interest paid 12/31/19 | 550,000 | |
Less: effective interest | (535,240) | (14,760) |
Carrying amount, 12/31/19 | 5,337,640 |
(Table 3)
2.
Prepare Company I’s shareholder’s equity section for the year ended December 31, 2019,
2.

Explanation of Solution
Company I | ||
Shareholder's equity section | ||
For the year ended December 31,2019 | ||
Particulars | Amount in $ | Amount in $ |
Contributed Capital: | ||
Common stock, $10 par; 2,000,000 shares authorized; 840,000 shares issued; 829,500 shares outstanding(3) | 8,400,000 | |
Additional paid-in capital: (4) | 2,485,000 | |
Retained earnings (5) | 4,765,000 | |
Accumulated other comprehensive income (loss): | ||
Unrealized decrease in value of marketable equity Securities (6) | (20,000) | |
Total contributed capital, retained earnings, and accumulated other comprehensive loss | 15,630,000 | |
Less: | (130,000) | |
Total Shareholders’ Equity | 15,500,000 |
(Table 4)
Working notes:
(3) Calculate the amount of common stock issued:
Particulars | Date | Shares | Amount |
Balance | December 31,2018 | 5,150,000 | |
Add: 5% stock dividend issued | March 3, 2019 | (150,000) | |
Balance | December 31,2019 | 8,400,000 |
(Table 5)
(4) Calculate the amount of additional paid-in capital on common stock:
Particulars | Amount in $ |
Balance, December 31, 2018 | 3,500,000 |
Deduct: Treasurystockreissued1/16/2019 | (30,000) |
Stock dividend issued on March 3, 2019 | 160,000 |
Balance, December 31, 2019 | 2,485,000 |
(Table 6)
(5) Calculate the amount of retained earnings:
Particulars | Amount in $ |
Balance, December 31, 2018 | 2,465,000 |
Deduct : Stock dividend issued,3/2/2019 | (560,000) |
Net income for 2019 | 2,860,000 |
Balance, December 31, 2019 | 4,765,000 |
(Table 7)
(6) Calculate the amount of unrealised decrease in the value of available-for-sale of securities:
(7) Calculate the amount of treasury stock at cost:
3.
Prepare a schedule representing the interest expense for the year ended December 31, 2019.
3.

Explanation of Solution
Particulars | Amount in $ |
Interest expense: | |
Note payable to bank (8) | 60,000 |
Debenture bonds payable (9) | 535,240 |
Total interest expense | 595,240 |
(Table 8)
Working notes:
(8) Calculate the amount of interest expense on the notes payable on bank:
(9) Calculate the amount of interest expense on debentures bond payable:
Want to see more full solutions like this?
Chapter 16 Solutions
INTERM.ACCT.:REPORTING...-CENGAGENOWV2
- how much overhead cost would be assigned to product G98X using the activity based costing system ?arrow_forwardThe closing price of a stock is $74.55, and the net earnings per share are $3.50. The stock's P/E ratio is .arrow_forwardI need guidance with this general accounting problem using the right accounting principles.arrow_forward
- Calculate the net sales revenuearrow_forwardI am looking for help with this general accounting question using proper accounting standards.arrow_forwardCariman contracts delivery drivers to service customers. Cariman owns the vans and pays for the gas. With reference to the following independent situations for Cariman, determine where (a) responsibility and (b) controllability lie. Suggest what might be done to solve the problem or to improve the situation: (20 marks)a) In the manufacturing plant the production manager is not happy with the material that the purchasing manager has been purchasing. In May the production manager stops requesting materials from the supply warehouse, and starts purchasing them directly from a different materials supplier. Actual materials costs in May are higher than budgeted.b) Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning

