21. indicate whether each of the following statements about retained earnings is true or false 10 points 23. Ruthven Company had the following transactions for 2018, the first year of operations: a) A dividend paid to stockholders decreases retained earnings. b) Issuing common stock for cash increases retained earnings. c) The amount of net income for a period must equal retained earnings. d) The purchase of a truck decreases retained earnings e) The amount of net income for a period increases retained earnings f) Retained earnings is increased by loans received from a bank. a) Operating expenses reported on the income statement increase retained earnings h) Common Stock is a part of contributed or paid-in capital for a corporation 1) Issued common stock for $50.000 cash 2) Purchased merchandise on account, $40,000, terms 1/10, /30. 3) Sold merchandise on account for $25,000. The inventory sold had cost $14.000 4) Paid for the merchandise purchased within the discount period. 5) Collected $20,000 on the merchandise sold on account 6) Paid operating expense of $5,000 Required: Answer the following questions. Show your work. 28 points 22. Sam Company borrowed $40,000 from the bank on December 1, 2018. The note had an 8 percent annual interest rate and matured on May 31, 2019, when Sam paid the principal and interest on the note. Required: Answer the following questions. Show your work. 17 points a) What are total assets at the end of 2018? b) What is the balance of the cash account at the end of 2018? c) What is gross margin for 2018? d) What is net income for 2018? e) What are total liabilities at the end of 2018? 1) What is total equity at the end of 2018? g) What is total retained earnings at the end of 2018? a) What amount of cash did Sam pay for interest in 2018? b) What amount of interest expense did Sam report on the 2018 income statement? c) What was the amount of liabilities that Sam reported on its balance sheet at the end of 2018? d) What was the amount of cash that Sam paid to the bank on May 31, 2018? e) What amount of interest expense was reported on the 2010 income statement? 24. At the beginning of the year, Kelly Sales had $2,400 of merchandise inventory. During the year, Kelly purchased $22.000 of inventory. At the end of the year, a count of the inventory revealed that Kelly had $1,800 of inventory on hand. Required: Determine the amount of depreciation expense to be recorded on the machine for the years 2018 and 2019 under each of the following methods: Required: Answer the following questions. Show your work. 10 points 2018 2019 Straight Line Double Declining Balance a) What is the amount of goods available for sale? b) What is cost of goods sold for the year? Show your work. 20 points 26. Sawyer Company reported the following information related to its August 31, 2018 Chase bank statement and their own records: The bank statement's balance is $3,405. b. The cash account balance in Sawyer's records is $3,193. c. The outstanding checks total $812. d. The deposits in transit amount to $1,415. e The bank service charge is $27. Sawyer's accountant wrote a check for $153 (in payment on an account payable) that was recorded incorrectly in the record as $135 but was paid correctly by the bank 9. The bank collected a note receivable on behalf of Sawyer in the amount of $ 1,060. 25. Teague Company purchased a new machine on January 1, 2018, at a cost of $150,000. The machine is expected to have an eight-year life and a $15.000 salvage value. Required: Prepare Sawyer's bank reconciliation on August 31, 2018 and prove the true cash that should be reported in the Balance Sheet. Show your work. 15 points 27. Allen Corporation was organized on July 15, 2018. It was authorized to issue 150.000 shares of $25 par value common stock and 50.000 shares of 6% cumulative preferred stock. The preferred stock had a stated value of $50 per share. The following stock transactions relate to Allen Corporation Issued 55.000 shares of common stock for $33 per share. Issued 2.750 shares of the preferred stock for $82 per share. Issued 27,500 shares of common stock for $35 per share. 28. Austin Corporation was authorized to issue 100.000 shares of $10 par common stock During 2018 Austin issued 30.000 shares at a market price of $15 per share. On December 1, 2018 Austin declared a cash dividend of $2 per share payable on December 30 to stockholders of record as of December 15. Required: 18 points a) Indicate the effect of each of these transactions on Allen's financial statements. Include dollar amounts in the model, below. After recording the three transactions, calculate column totals. b) After these transactions have been recorded, what is the total amount of stockholders equity? c) After these transactions have been recorded, how many shares of common stock are outstanding? Required: Answer the following questions. Show your work. 20 points Indicate effect on financial statements on the date of declaration, date of record, and date of payment of the cash dividends. Use the model below. 29. Maple Company started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first unit cost $800 and the second, $700. One of the items was sold during the year. Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory, assuming use of 12 points a LIFO b. FIFO c. Weighted average 30. Houston Corporation has the following stock outstanding: In 2018, Houston paid $330.000 in dividends. No dividends were paid in 2017 or 2010 Required: Answer the following questions. Show your work. 10 points Compute the total amount of dividends that was paid to each class of stock. Common Stocks 31. On January 1, 2018, Jack Co. issued three $100,000.0%, bond payables that mature in 5 years Straight line depreciation is used. Preferred Stocks Required: Consider the facts above and answer each of the three independent situations described below. Answer the following questions. Show your work. 15 points Bond #1 is issued at 100 with annual payments at December 31 2. The bonds were sold Discount, Premium, or Face upon sale: 3. Cash interest paid at December 31 Cash received upon sale: 2. The bonds were sold Discount, Premium, or Face upon sale 4. Bond interest expense in the Income Statement at December 31 Carrying Value of the Bonds on the Balance Sheet at December 31 Cash interest paid at December 31 4. Bond interest expense in the Income Statement at December 31 5. Carrying Value of the Bonds on the Balance Sheet at December 31 32. Stanton Company issued five-year 7% bonds with a face value of $100,000, for $98,587.94 on January 1, Year 1 when the market (effective) rate of interest was 7.5%. The bonds pay annual interest each December 31. Stanton uses the effective interest method for amortization of premium or discount on bonds payable. Round your answers to two decimal places. Bond #2 is issued at 103 with annual payments at December 31 1. Cash received upon sale: 2. The bonds were sold Discount Premium, or Face upon sale: 3. Cash interest paid at December 31 Required: a) What is the annual amount of cash that Stanton will pay to bondholders for interest? b) What amount of interest expense and discount amortization should Stanton recognize for Year 1? What is the carrying amount of the ability on December 31, Year 1? c) What amount of interest expense and premium amortization should Stanton recognize for Year 2? What is the carrying amount of the ability on December 31. Year 2? d) What is the total amount of interest that Stanton will record in interest expense over the life of the bond? 4. Bond interest expense in the Income Statement at December 31 5. Carrying Value of the Bonds on the Balance Sheet at December 31 21 points Bond #3 is issued at 98 with annual payment at December 31. 1. Cash received upon sale: order to expand to new territories. Which course of actions would you be using to raise the capital and why 22 points 33. Describe the advantages and disadvantages of debt financing as compared to equity financing. If you were the CFO of LHR Dallas Holding Incorporated and need to raise capital in