330 331 PART III 332 Razul took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used 333 for large production companies. He employs several people, but is looking to expand his operations further. In 334 addition to expanding the sales of electrical parts, he also wants to start selling heating, ventilation and air 335 conditioning (HVAC) parts and machinery through a separate division of the company called 'HVAC Parts & 336 Machinery. Currently, Razul owns all the shares in the corporation. To raise the needed cash, he decides to offer 337 common and preferred shares for sale to investors starting in 2021. Below is the balance sheet at the end of 2020 338 339 Holister Electric Inc 340 Balance Sheet 341 As at December 31, 2020 342 Assets Liabilities 343 Cash $22,410 Accounts Payable $15,400 344 Accounts Receivable 16,700 Unearned Revenue 8,100 345 Prepaid Insurance 5,500 Bank Loan 25,000 346 Inventory 81,400 Total Liabilities 48,500 347 Property, Plant & Equipment 215,000 Shareholders' Equity 348 Accumulated Depreciation -28,000 Common Shares - 80,000 issued 80,000 349 Retained Earnings 184,510 350 Total Shareholder's Equity 264,510 351 Total Assets $313,010 Liabilities & Owner's Equity $313,010 352 353 At 2020, Razul has authorized 150,000 common shares and 16,000 preferred shares. The preferred shares will be 354 cumulative and pay $4 dividends. The 80,000 shares issued were issued to Razul. He will maintain control of the 355 company and sit on the board of directors. 357 358 Transactions during 2021 359 a) On January 1, Holister purchased a strategic investment of 16,100 shares in Gregor Inc. for $13 per share. This 360 represents 32% of Gregor Inc. common shares. On December 31, Gregor Inc, declares and pays a $71,000 dividend 361 and reports a net income of $380,000. Holister will use the equity method to record this investment 362 364 365 b) on January 1, Razul has located a few private investors that wish to purchase shares in the new corporation, 366 Some want common shares, while other are interested in preferred shares. Holister Electric Inc. issued 40,000 367 common shares for $100,000 cash and issued 7,000 preferred shares for $28,000 cash. 368 tes for some 70 71 72 c) On March 1, Holister Electric Inc. issued and sold $180,000, 8 year bonds with an interest rate of 9%. The market 373 rate at the time of issue was 10%. Any premium or discount on the bond is amortized using the effective interest rate method. Interest will be paid annually on February 28. The Present value of 1 and annuity of 1 of 10% for 6 374 periods are 0.4665 and 5.3349, respectively. Use a 4 decimal factor for the bond calculation. B77 378 d) On April 1, the company has extra cash on hand and would like to invest it in short-term bonds issued by 380 Gamma Ltd. The company bought 21, $1,200 short term (one-year) bonds at par on this date and intended to sell 381 these bonds before maturity. The interest rate on the bond is 12%, payable annually at March 31. On December 382 31, 2021, each bond was trading in the market at $1,300. On January 1, 2022, all bonds were sold for $29,000. 384 385 e) On July 1, Holister purchased a $60,000, 7 year bond paying 8%. Interest is paid every 6 months on December 31 386 and June 30. The company plans to hold onto the bond until it matures. 387 389 390 f) on November 23, the company purchased 2,800 shares of Daenerys Inc. at $23 per share for the purpose of 391 trading. The shares are less than 6% of the total shares of Daenerys Inc. and are a non-strategic investment. By 392 December 31, the price per share had gone up to $25 per share. 394 395 ) During 2021, Holister Electric Inc. has performed well, so the board of directors decided to pay dividends. On 396 November 30, 2021, the company declared cash dividends of $72,000, which will be paid out on December 15, 397 2021. Use the cash dividends method and close cash dividends at the end of the year 399 400 Prepare the journal entries for the issue of shares, issue of the bonds and the dividends, plus all the investments 38 M 401 made during the year, 2021. Also prepare adjustments at year end to accrue interest on the bond and to record 402 change to any applicable investments. Anz 38 M 400 Prepare the journal entries for the issue of shares, issue of the bonds and the dividends, plus all the investments 401 made during the year, 2021. Also prepare adjustments at year end to accrue interest on the bond and to record 402 change to any applicable investments. 403 DR CR Date 1-Jan 48,000 404 405 406 407 408 409 410 411 Account Title and Explanation lunvestment in Gregor Inc. Shares Cash 16,100*13=48,000 (To record purchase of 16,100 common shares of Gregor Inc. 48,000 1-Jan 128,000 Cash Common Share Preference Share (To record issue of common shares and preference shares) 100,000 28,000 412 1-Mar Cash 170,396 170,396 Bond Issued ((180000*0.09)*53349)+(180000*0.4665)=170,369 (To record bonds issued) 25,200 1-Apr investment in short term bond (21*1200) Cash (To record investment in short term bond) 25,200 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 1-Jul 60,000 Investment in 7 year bond Cash (To record investment made in long term bond) 60,000 64,400 23-Nov Investment shares of Daenerys Inc. Cash (Record of shares purchased) 64,400 72,000 72,000 30-Noy Retained earnings Cash (To record dividend declared) Shoot 1 71 F G H 72,000 72000 Cash 121,600 121,600 22,720 22,720 18,840 18,840 D E 133 436 15-Dec Dividend payable 437 438 (Record of dividend paid) 1439 440 31-Dec Investment in Gregor Inc. 441 Investment revenue 442 (380000*0.32) 1443 (Record of revenue received from Investment) 444 445 31-Dec Cash 446 Investment in Gregor Inc. 1447 (71000*0.32) 448 (To record dividend received) 1449 450 31-Dec Interest Payable on bond 1451 Cash 452 (To record interest paid on effective rate of 11.05%) 453 454 31-Dec Investment in bond(108211 455 interest occured (To record interest earned accured) 457 458 31-Dec Profit and loss 459 Investment in short term bonds 460 (Being a record of 6 months interest received) 461 462 31-Dec Cash 463 Interest received on 7 year bond 464 (Being a record of 6 months interest received) 465 466 31-Dec Interest received Profit and loss 468 (Record of interest posted to P&L) 469 1470 31-Dec Investment shares if Daeberys Inc Profit and Loss 1472 (Record of investment in share revalued) 2.268 2,268 456 2,400 2,400 2,400 2,400 2,400 2,400 467 5,600 471 5,600 Sheet 1 + D Althed of the year Holter Electriche Tribe The Add to planned and had to be discontinued Below is the updated and correct balances taking into consider the tractions during the year 406 including day-to-day tries and the tractions above 67 Complete by in the single that you dig your 488 interest interest rate and interest revenue balances we from the borded and 489 purchased during the rest expertos are theyat 490 491 402 Atlume the rates 20. Amma income tax free powiato the income 193 were on the income art 494 Income Tax Expense and income Tax Savings on the Trance you are on the 495 Income 496 497 Haltar ) IM Actualance 499 December 2011 500 Account Data Cada 501 Cath 502 Account Receivable 525200 503 latest Receivable 50 Prepaid $17.9D SOS Short Termine Datine SGB 400 506 Sheermes-Bonda 507 Van Allowance for Men Sodo 9,00 509 Investing in common shares 510 Long Term went and 511 Discount on on 512 progetty. Plant A Copment 5260 513 Actuated preciation 514 Apvble $10.000 515 Payable 516 Unred 58100 517 Premium on fonds 518 Bondable 519 Bano $120.000 520 Comment 521 ferred 522 Retained ning 5112.310 523 Interest leven 524 Refrentementen Gegering 535 UdGainonta Antent 526 Income Tax Save Did Open 527 Sales Revenue 579.000 528 Discount $10.00 529 Sales and Allies $11.700 530 Cost of Good Sold 5338400 53 Depreciation Espente 540.000 502 Inc S600 533 rap $21.400 534 from Donued Open $172.000 535 Maintenance Lapte $2400G 536 Postales pense 53000 537 Gene SARL 989 200 $2.400 539 Telephone 540 pm 511 Income Tax ans. Continuing 542 tonfalls Amant 543 51.783 1785730 544 No 545 The loan is all over 4 years and $10,000 will be paid by December, 2022. Theo 546 ON K345 548 Spinome the who 550 W 551 550 Halter Electric 553 Income 554 For the Bar Ended December 11, 2001 555 596 50 500 Sot 562 563 554 565 565 567 566 19 520 571 572 573 374 575 576 522 578 50 SH 581 582 Se 564 SRS 585 547 SS SES 590 Gaines per here for income 591 192 990 594 595 590 597 598ment of December 312001. Round when 599 Hollisterlerint 500 Statement of Retained Earnings 001 for the Ended December 31, 2011 602 604 605 006 B C D G H 607 Prepare a Classified Balance Sheet at December 31, 2021. Round answers to the nearest whole number 608 Holister Electric inc. 609 Balance Sheet 32 Marks 610 As at December 31, 2021 611 612 613 614 615 616 617 618 619 620 621 622 623 624 625 626 527 628 629 630 631 632 633 634 635 636 637 638 639 610 641 642 643 644 645 646 647 618 649 650 651 Using the balance sheet from the end of last year when the company was still a proprietorship and the balance 652 wheet just created, prepare a cash flow statement using the indirect method. Round answers to the nearest whole 653 number 654 Nota No Property Man and Equipment was said during the year 655 656 Hint Amarted bond discount or premium should be added to the operating activities, if there any Carrying 657 amount of the bonds should be presented in the financing activities K345 D E G A H 16 Mark Halle Cal Row Statement for the newcomer 11, 2021 658 69 660 361 662 663 654 665 666 067 68 669 670 071 622 623 624 678 676 578 629 680 681 682 683 684 ses 187 689 ba 90 601 692 GA 695 197 Hotelectric war able to find financial tenants of another on Stars Supplies in the operate in the Same industry. The comparative Income states and bence sheet of the comblo 2020 5957.000 124.200 09 200 Stark Suppleme 701 Income 2012 For the Yew Ended December 31 2321 704 Sales Rowe as 000 705 Low Cost of Goods Sold 1 206 Gros en 531 307 700 grating per 709 Opties $345.000 710 info $125.000 211 Deprecenin 22000 712 Total Operatopenie 713 from 21.500 714 Income 180 715 Naceme 28 716 717 78 TI $472.000 $28.000 S.RO SD 2. 2104