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1 Trademarks were previously acquired for $200,000 on January 1, 2018. Estimated useful life at the time of acquisition was 20 years. In 2019 there
1 | Trademarks were previously acquired for $200,000 on January 1, 2018. Estimated useful life at the time of acquisition was 20 years. | ||||
In 2019 there was litigation challenging these trademarks brought by a competitor and GeneralProducts successfully | |||||
defended these trademarks at a legal cost of $45,000. The new (updated) useful life of the trademarks was estimated to be 25 years from the date of acquisition. | |||||
2 | All sales were on credit and totaled $940,560. COGS totaled $780,650. | ||||
3 | Included in the total sales of $940,560 were the sales of 6,000 soap powder boxes. | ||||
As a premium offer to increase soap powder sales, GeneralProducts includes one special coupon with every soap powder box. Customers can redeem 4 coupons | |||||
to obtain one free premium item, a kitchen utensil. Based on past experience, 60% of the coupons are expected to be redeemed by customers. | |||||
During 2019, 3,400 coupons were actually redeemed. Also in 2019, GeneralProducts purchased | |||||
an additional 1,000 premiums (kitchen utensil items) @ $1.10 each on credit to add to its Inventory of Premiums. | |||||
4 | 5-year 6% bonds were issued on January 1, 2018, sold to yield 8% interest. Interest is paid semiannually on January 1 and June 30 for these bonds. | ||||
Maturity value of the bond issue is $100,000 and the issue was sold at a discount of $8,111 for an initial carrying value of $91,889. | |||||
The bond indenture indicated that GeneralProducts may later call and redeem these bonds @101 any time after June 30, 2019. | |||||
These bonds were subsequently called and redeemed on September 1, 2019, following the sale of a new 5% bond issue | |||||
taking advantage of lower interest rates (see Item 5 below). The effective-interest method is applied to amortize the discount. | |||||
5 | To take advantage of lower interest rates and to finance the call and redemption of the previously issued 6% bonds @ 101 | ||||
on September 1, 2019, GeneralProducts issued new 5% bonds with face value of $100,000 to yield 6%. | |||||
The maturity period of these new 5% bonds is 10 years and interest is paid semiannually on January 1 and June 30. | |||||
The new 5% bonds were issued at a discount of $7,438 for an initial carrying value of $$92,562 on July 1, 2019. | |||||
The effective-interest method is applied to amortize the discount. | |||||
6 | Selling and Administrative Expenses excluding non-cash items totaled $87,345. PP&E is depreciated using the straight-line method over 25 years of life. | ||||
7 | Cash collected from customers totaled $906,450. | ||||
8 | Cash paid to suppliers for credit purchases totaled $728,254. | ||||
9 | Purchases of inventory totaled $689,525. All purchases were on credit. | ||||
10 | GeneralProducts purchased land for $30,000 in advance of construction of a building and paid in full. | ||||
Requirements to be completed: | |||||
Requirement | |||||
1 | Record the necessary journal entries for 2019. | ||||
2 | Prepare the Income Statement and Statement of Retained Earnings for the year 2019. | ||||
3 | Prepare the classified Balance Sheet as of December 31, 2019. | ||||
4 | Show full calculation work! | ||||
Please round your calculated answers to the closest dollar and ignore taxes. |
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