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Return Completed Assignments to: Robert Miller Distance Education Question 1 [25 points] Callaho Inc. began a very lucrative consulting operation on June 1 2014. They are authorized to issue 500000 shares of $5.00 cumulative preferred shares. They are also authorized to issue 650000 common shares. a. June 11 : 13000 common shares were issued in exchange for land valued at $35000. The shares were actively trading on this date at $3.00 per share. b. June 18 : 9000 of the common shares were issued for a total of $45000 cash. c. June 19 : Gave the corporation’s promoters 7000 common shares for their services in organizing the corporation.The directors valued the services at $21000. d. June 23 : 8000 of the preferred shares were issued for a total of $112000 cash. e. June 25 : Issued 7000 preferred shares at $14.00 per share for cash. f. June 30 : In addition to the declaration of the annual dividend on the preferred shares dividends of $58000 were declared on the common shares today. Required: Prepare journal entries for the above transactions. Question 2 [25 points] The accounts for Gulf Corp. reported the equity account balances shown in the table below on December 31 2014: Preferred shares $4 cumulative unlimited shares authorized 0 Common shares unlimited shares authorized 46000 shares issued and outstanding 138000 Retained Earnings 270000 In 2015 Gulf Corp. had the following transactions affecting shareholders and the statement of changes in equity accounts: a. February 24 : A 25% share dividend was declared when the market value was $20.00 per share to be paid on March 7. b. March 7 : Date of distribution regarding the 25% share dividend. c. March 27 : Issued 9000 preferred shares at $13.00 per share for cash. d. April 25 : The directors declared a total cash dividend of $93500 payable on May 10 to the May 5 shareholders of record. e. May 10 : The cash dividend declared on April 25 was paid. f. December 31 : Closed the $280000 credit balance in the Income Summary account. g. December 31 : Closed the dividend accounts. Required: 1) Prepare general journal entries to record the transactions. 2) Prepare the equity section of the balance sheet as of the close of business on December 31 2015. Gulf Corp. Equity Section of Balance Sheet December 31 2015 Contributed capital: 9000 Preferred Sharesshares issued and outstanding 57500 Common Sharesshares issued and outstanding Total contributed capital Retained earnings Total equity Question 3 [25 points] Vision Consulting Inc. intends to raise $1000000 to purchase buildings to use as rental properties. Two options are available: Plan 1 : Issue $1000000 of 5% 6-year bonds or Plan 2 : Issue 5000 common shares at $200 per share. The buildings are expected to generate rental income before interest and tax of $750000. Vision Consulting Inc.’s tax rate is 15%. The projected adjusted trial balance at December 31 2014 one year after the expansion under each of Plan 1 and Plan 2 is shown below. Account Balance Balance Plan 1 Plan 2 Accumulated Depreciation Building 2050 2050 Bonds Payable 1000000 0 Building 1000000 1000000 Cash 84500 184500 Common Shares 7900 1007900 Consulting Revenue Earned 27100 27100 Depreciation Expense Building 2050 2050 Income Taxes Expense ??? ??? Income Taxes Payable ??? ??? Interest Expense 465300 365300 Interest Receivable 143200 143200 Preferred Shares 6900 6900 Rent Earned 750000 750000 Rent Payable 2200 2200 Rent Receivable 26050 26050 Retained Earnings 112700 112700 Supplies Expense 113550 113550 Utilities Expense 74200 74200 Required: Prepare a single-step income statement for 2014(showing income before tax and income tax expense separately) and a classified balance sheet at December 31 2014 assuming a. Plan 1 and then b) Plan 2. Question 4 [25 points] X-cell Inc. showed the following adjusted trial balance at its year-end January 31 2014. Assume that X-cell Inc.’s tax rate is 25% and that it is accrued when calculated at year end. The ABC Inc. bonds investment is intended to be held until it is due in 2024. The Investment in Star Inc. is an investment in an associate. Account Balance Accounts Payable 228000 Accounts Receivable 118000 Accumulated Amortization Copyright 12500 Accumulated Amortization Patents 63500 Accumulated Depreciation Furniture 40000 Allowance for Doubtful Accounts 500 Amortization Expense Copyright 12000 Amortization Expense Patents 17500 Cash 50000 Cash Dividends 32000 (1) Common Shares 48500 (2) Copyright 60500 Delivery Expense 20000 Depreciation Expense Furniture 11000 Earnings from Investment 41000 Furniture 319500 Interest Earned 31000 Investment in ABC Inc. bonds 56000 Investment in Star Inc. common shares 83000 Land 124000 Patents 135500 Preferred Shares 74000 Prepaid Rent 30000 Rent Earned 70500 Rent Expense 99500 Rent Payable 295000 Retained Earnings 74500 Unearned Rent 189500 1 $9600 of the $32000 total dividends declared for the current accounting period relate to preferred shares with the remainder to common shares. 2 $9700 of common shares were issued during the year ended January 31 2014. Required: a) Prepare X-cell Inc.’s income statement (showing both income before tax and income tax expense separately) for the year ended January 31. b) Prepare X-cell Inc.’s statement of changes in equity for the year ended January 31. c) Prepare X-cell Inc.’s classified balance sheet at January 31.

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