Accounting homework, needed by 04/30/15 10PM

Question 5.

“Look how great we are doing,” said Sawyer Mittlestaedt, president of Elliott Company. “Our sales have grown from $1.6 million to $2.0 million this year, we about doubled our warehouse space, and we have more cash in the bank than we started with. A few more years of growth like this and we’ll be tops in the industry.”

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“Yes, our statements look pretty good,” replied Endia Bush, the company’s vice president for finance. “But I have concerns that we’re doing business with a lot of companies we don’t know much about. But I do agree, we’re certainly selling a lot of merchandise; our inventory is actually down from last year.”

 

See statements on next page.


Elliott Company

Comparative Balance Sheets

At December 31, 2015 and 2014

 

   

     2015

2014

 

Assets

 

 

 

Current assets:

 

 

 

Cash.

$42,000

$     27,000

15000 incr

Marketable securities

  19,000

       13,000

 

Accounts receivable.

710,000

     530,000

 

Inventory 

848,000

860,000

 

Prepaid expenses

   10,000

5,000 

 

Total current assets

1,435,000 

1,629,000

 

Long-term investments 

60,000

110,000 

 

Loans to subsidiaries

130,000

80,000 

 

Plant and equipment  

3,170,000

2,600,000

 

  Less accumulated depreciation   

810,000

755,000 

 

Net plant and equipment   

2,360,000

1,845,000 

 

Patents 

84,000

90,000 

 

Total assets 

$4,263,000

$3,560,000 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

  Accounts payable

$   970,000

$   670,000

 

  Accrued liabilities

65,000

 82,000 

 

Total current liabilities

  1,035,000

752,000

 

Long-term Bonds Payable

820,000

600,000

 

Notes payable

95,000

80,000 

 

Total liabilities

1,950,000

1,432,000

 

Stockholders’ equity:

 

 

 

  Common stock

  1,740,000

1,650,000

 

  Retained earnings .

573,000

478,000 

 

Total stockholders’ equity

  2,313,000

2,128,000 

 

Total liabilities and stock

$4,263,000

3,560,000

 

 

Elliott’s income statement for 2015 follows

 

Sales

 

$2,000,000

Cost of goods sold 

 

1,300,000  

Gross profit

 

700,000

Selling and administrative expenses

  

490,000  

Net operating income

 

210,000

Nonoperating items:

 

 

  Gain on sale of investments 

$60,000

 

  Loss on sale of equipment.

20,000

40,000

Income before taxes 

 

 250,000

Income taxes

 

  80,000  

Net income  

 

$   170,000  

 

The following additional information is available about Elliott’s activities during 2015:

  1. Cash dividends declared and paid to the common stockholders totaled $75,000.
  2. Long-term BONDS with a value of $380,000 were repaid during the year.
  3. Equipment was sold during the year for $70,000. The equipment had cost $130,000 and had $40,000 in accumulated depreciation on the date of sale.
  4. Long-term investments were sold during the year for $110,000. These investments had cost $50,000 when purchased several years ago.

 

 

5-1. Ms. Bush asks you to prepare a statement of cash flow (indirect method) for 2015.

 

5-2. What is Elliott’s free cash flow? Interpret your findings.

 

5-3. Is Elliott Corp. doing as well as its CEO believes? Discuss.

 

Question 7.

     Thompson Co. had the following investment transactions during the current year.

 

Feb. 6

Purchased 1,000 shares of Fernandez Finance Co. for $40 per share plus brokerage costs of $225. Thompson intends to sell these shares when the timing is right to make a gain.

 

 

Mar. 31

Purchased 15 $1,000 face, 8% bonds of Brown Corp. at 97½. They mature in ten years, and interest is paid seminannually on February 1 and August 1. Thompson has the intent and ability to hold these until maturity. Thompson also determines that the difference between effective interest rate amortization and straight-line is immaterial.

 

 

June 20

Received a $2.20 per share dividend on Fernandez Finance Co. shares.

 

 

August 1

Received interest check from Brown Corp.

 

 

Sept. 4

Acquired 4,000 shares of Jurgeson Conglomerate’s stock for $30 per share plus $600 transaction costs. These shares were classified as available-for-sale securities.

 

 

Dec. 31

Market values of Fernandez Finance Co. and Jurgeson Conglomerate stock were $45 and $28 per share, respectively. Brown Corp. bonds were trading at 99.

 

1-1. Prepare journal entries with appropriate supporting computations for the year’s transactions.

 

1-2. Show how each investment would be reported in Thompson’s financial statements…

 

 

 

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