334 332 Razul took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used for large 333 production companies. He employs several people, but is looking to expand his operations further. In addition to expanding the sales of electrical parts, he also wants to start selling heating, ventilation and air conditioning (HVAC) parts and machinery through a separate division of the company called 'HVAC Parts & Machinery.' Currently, Razul owns all the shares in the 336 corporation. To raise the needed cash, he decides to offer common and preferred shares for sale to investors starting in 2021. Below is the balance sheet at the end of 2020. 337 335 338 339 Holister Electric Inc. 340 Balance Sheet 341 As at December 31, 2020 342 Assets Liabilities 343 Cash $32,850 Accounts Payable $33,500 344 Accounts Receivable 21,420 Unearned Revenue 10,800 345 Prepaid Insurance 11,300 Bank Loan 37,200 346 Inventory 75,200 Total Liabilities 81,500 347 Property, Plant & Equipment 218,000 Shareholders' Equity 348 Accumulated Depreciation -46,000 Common Shares - 100,000 issued 100,000 349 Retained Earnings 131.270 350 Total Shareholder's Equity 231,270 351 Total Assets $312,770 Liabilities & Owner's Equity $312,7701 352 353 At 2020, Razul has authorized 170,000 common shares and 15,000 preferred shares. The preferred shares will be cumulative and 354 pay $9 dividends. The 100,000 shares issued were issued to Razul. He will maintain control of the company and sit on the board 355 of directors 482 483 At the end of the year, Holister Electric has adjusted Trial balance. 484 - The expansion into HVAC did not go as planned and had to be discontinued. 485 - Below is the updated and correct balances taking into consideration the transactions happened during the year (including day-to-day 486 transactions and the transactions above). 487 - Complete the list by filling in the missing values from the journal entries you created during the year. 488 *Interest payable, interest receivable, and interest revenue balances are from the bonds issued and purchased during 489 the year. Interest expense from bank loan are paid within the year. 490 491 492 Assume the tax rate is 28%. Assume income tax has already been paid. You will just have to calculate the income tax expense on the 493 income statement. 494 495 Leave Income Tax Expense and Income Tax Savings blank on the Trial Balance until you calculate them on the income statement. 496 497 Holister Electric Inc. 14 Marks 498 Adjusted Trial Balance 499 December 31, 2021 500 Account Title Debit Credit 501 Cash $6,075 502 Accounts Receivable $36,520) 503 Interest Receivable 504 Prepaid Insurance $24,560 505 Short-Term Investment - Daenerys Inc. $78,000 506 Short-Term Investments - Bonds $45,600 507 Valuation Allowance for Fair Value Adjustment 508 Inventory $148,000 509 Investment in Gregor Inc. Common shares 510 Long-Term Investment - Bond 511 Discount on Bonds 512 Property, Plant & Equipment $296,000 513 Accumulated Depreciation $93,100 514 Accounts Payable $145,000 515 Interest Payable 516 Unearned Revenue $10,800 - E F H 516 Unearned Revenue $10,800 517 Premium on Bonds 518 Bonds Payable 519 Bank Loan $248,000 520 Common Shares 521 Preferred Shares 522 Retained Earnings $11,270 523 Interest Revenue 524 Revenue from Investment in Gregor Inc. 525 Unrealized Gain on Fair Value Adjustment 526 Income Tax Savings - Discontinued Operations 527 Sales Revenue $871,000 528 Sales Discounts $27,100 529 Sales Returns and Allowances $38,800 530 Cost of Goods Sold $365,820 531 Depreciation Expense $47,100 532 Insurance Expense $7,900 533 Interest Expense $36,561 534 Loss from Discontinued Operations $142,000 535 Maintenance Expense $33,300 536 Professional Fees Expense $19,650 537 Rent Expense $ 66,000 538 Salaries Expense $89,100 539 Telephone Expense $6,200 540 Travel Expense $39,300 541 Income Tax Expense - Continuing Operations 542 Unrealized Loss on Fair Value Adjustment 543 Total $2,191,040 $2,191,040 544 Notes: 545 The bank loan is payable over 7 years and $35,429 will be paid by December 31, 2022. The interest on this loan is 8% per annum 546 548 549 550 Prepare a multistep income statement for the year ending December 31, 2021. Round answers to the nearest whole number. 551 29 Marks - 552 553 Holister Electric Inc. Income Statement For the Year Ended December 31, 2021 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 570 571 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 589 Calculate the earnings per share for i) Income from Continuing Operations, ii) Net Income. 590 591 592 593 594 595 596 597 598 Prepare a statement of retained earnings at December 31, 2021. Round answers to the nearest whole number. 599 Holister Electric Inc. 600 Statement of Retained Earnings 601 For the Year Ended December 31, 2021 602 603 604 605 606 607 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 cboat 696 Holister Electric was able to find financial statements of another company, Stark Supplies Inc., that operates in the same industry. The 697 comparative income statement and balance sheet of this company is shown below. 698 699 700 Stark Supplies Inc. 701 Income Statement 702 For the Year Ended December 31 703 2021 2020 704 Sales Revenue $831,500 $858,000 705 Less Cost of Goods Sold 332,600 $343,200 706 Gross Profit 498,900 514,800 707 708 Operating Expenses 709 Operating Expenses $320,300 $325,600 710 Interest Expense $136,000 $109,000 711 Depreciation Expense 27.600 $25,500 712 Total Operating Expenses 483.900 460,100 713 Income from Operations 15,000 54,700 714 Income Tax Expense 4,200 15,316 715 Net Income 10,800 39,384 716 717 718 719 720 721 722 723 724 725 Stark Supplies Inc. Comparative Balance Sheet As at December 31 2021 2020 726 727 728 Assets 729 Current Assets 730 Cash $269,600 $286,500 724 725 Stark Supplies Inc. Comparative Balance Sheet As at December 31 726 727 2021 2020 $269,600 180,100 59,000 96,000 $604,700 $286,500 141,000 67,000 86,000 $580,500 495,000 -272.600 222.400 $827.100 489,000 -245,000 244,000 $824,500 728 Assets 729 Current Assets 730 Cash 731 Accounts Receivable 732 Prepaid Insurance 733 Inventory 734 Total Current Assets 735 urr Assets 736 Property, Plant & Equipment 737 Accumulated Depreciation 738 Total Non-Current Assets 739 Total Assets 740 741 Liabilities 742 Current Liabilities 743 Accounts Payable 744 Unearned Revenue 745 Total Current Liabilities 746 Non-Current Liabilities 747 Bank Loan 748 Total Non-Current Liabilities 749 Total Liabilities 750 751 Shareholders' Equity 752 Common Shares 753 Retained Earnings 754 Total Shareholders' Equity 755 Liabilities & Shareholders' Equity 97,100 37,100 $134,200 94.800 32.600) $127,400 91,300 91.300 225,500 94,000 94,000 221,400 181.000 422.100 195,000 406,600 601,600 $827.100 603,100 $824,500 759 757 Using the income statement and balance sheet from Holister Electric and Stark Supplies, calculate the appropriate ratios to determine 758 which company is doing better in the categories listed below. Round all ratios to 2 decimal places. Write your explanations in the textbox. 760 761 a) profitability for 2021 (gross profit margin, net profit margin, ROE, ROA, asset turnover) 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 b) liquidity for 2021 (current ratio, quick ratio, debt-to-equity) 778 779 780 781 782 783 784 785 786 787 788 789 790 776 777 b) liquidity for 2021 (current ratio, quick ratio, debt-to-equity) 778 779 780 781 782 783 784 785 786 787 788 789 790 791 c) management performance (DSO, A/R turnover, inventory days on hand, inventory turnover) 792 793 794 795 796 797 798 799 800 801 802 803 804 805 d) Analyze and compare the performance of the two companies using at least two ratios from each category. (The analysis is not 806 expected to exceed 250 words). 807 808 652 Using the balance sheet from the end of last year (when the company was still a proprietorship) and the balance sheet just created, 653 prepare a cash flow statement using the indirect method. Round answers to the nearest whole number. 654 Note: No Property, Plant and Equipment was sold during the year. 655 Hint : Amortized bond discount or premium should be added to the operating activities, if there is any. Carrying amount of the bonds 656 should be presented in the financing activities. 657 658 659 Holister Electric Inc. 660 Cash Flow Statement 26 Marks 661 For the Year Ended December 31, 2021 662 663 664 665 666 667 668 669 670 671 672 673 674 675 676 677 678 679 680 681 682 683 684 685 334 332 Razul took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used for large 333 production companies. He employs several people, but is looking to expand his operations further. In addition to expanding the sales of electrical parts, he also wants to start selling heating, ventilation and air conditioning (HVAC) parts and machinery through a separate division of the company called 'HVAC Parts & Machinery.' Currently, Razul owns all the shares in the 336 corporation. To raise the needed cash, he decides to offer common and preferred shares for sale to investors starting in 2021. Below is the balance sheet at the end of 2020. 337 335 338 339 Holister Electric Inc. 340 Balance Sheet 341 As at December 31, 2020 342 Assets Liabilities 343 Cash $32,850 Accounts Payable $33,500 344 Accounts Receivable 21,420 Unearned Revenue 10,800 345 Prepaid Insurance 11,300 Bank Loan 37,200 346 Inventory 75,200 Total Liabilities 81,500 347 Property, Plant & Equipment 218,000 Shareholders' Equity 348 Accumulated Depreciation -46,000 Common Shares - 100,000 issued 100,000 349 Retained Earnings 131.270 350 Total Shareholder's Equity 231,270 351 Total Assets $312,770 Liabilities & Owner's Equity $312,7701 352 353 At 2020, Razul has authorized 170,000 common shares and 15,000 preferred shares. The preferred shares will be cumulative and 354 pay $9 dividends. The 100,000 shares issued were issued to Razul. He will maintain control of the company and sit on the board 355 of directors 482 483 At the end of the year, Holister Electric has adjusted Trial balance. 484 - The expansion into HVAC did not go as planned and had to be discontinued. 485 - Below is the updated and correct balances taking into consideration the transactions happened during the year (including day-to-day 486 transactions and the transactions above). 487 - Complete the list by filling in the missing values from the journal entries you created during the year. 488 *Interest payable, interest receivable, and interest revenue balances are from the bonds issued and purchased during 489 the year. Interest expense from bank loan are paid within the year. 490 491 492 Assume the tax rate is 28%. Assume income tax has already been paid. You will just have to calculate the income tax expense on the 493 income statement. 494 495 Leave Income Tax Expense and Income Tax Savings blank on the Trial Balance until you calculate them on the income statement. 496 497 Holister Electric Inc. 14 Marks 498 Adjusted Trial Balance 499 December 31, 2021 500 Account Title Debit Credit 501 Cash $6,075 502 Accounts Receivable $36,520) 503 Interest Receivable 504 Prepaid Insurance $24,560 505 Short-Term Investment - Daenerys Inc. $78,000 506 Short-Term Investments - Bonds $45,600 507 Valuation Allowance for Fair Value Adjustment 508 Inventory $148,000 509 Investment in Gregor Inc. Common shares 510 Long-Term Investment - Bond 511 Discount on Bonds 512 Property, Plant & Equipment $296,000 513 Accumulated Depreciation $93,100 514 Accounts Payable $145,000 515 Interest Payable 516 Unearned Revenue $10,800 - E F H 516 Unearned Revenue $10,800 517 Premium on Bonds 518 Bonds Payable 519 Bank Loan $248,000 520 Common Shares 521 Preferred Shares 522 Retained Earnings $11,270 523 Interest Revenue 524 Revenue from Investment in Gregor Inc. 525 Unrealized Gain on Fair Value Adjustment 526 Income Tax Savings - Discontinued Operations 527 Sales Revenue $871,000 528 Sales Discounts $27,100 529 Sales Returns and Allowances $38,800 530 Cost of Goods Sold $365,820 531 Depreciation Expense $47,100 532 Insurance Expense $7,900 533 Interest Expense $36,561 534 Loss from Discontinued Operations $142,000 535 Maintenance Expense $33,300 536 Professional Fees Expense $19,650 537 Rent Expense $ 66,000 538 Salaries Expense $89,100 539 Telephone Expense $6,200 540 Travel Expense $39,300 541 Income Tax Expense - Continuing Operations 542 Unrealized Loss on Fair Value Adjustment 543 Total $2,191,040 $2,191,040 544 Notes: 545 The bank loan is payable over 7 years and $35,429 will be paid by December 31, 2022. The interest on this loan is 8% per annum 546 548 549 550 Prepare a multistep income statement for the year ending December 31, 2021. Round answers to the nearest whole number. 551 29 Marks - 552 553 Holister Electric Inc. Income Statement For the Year Ended December 31, 2021 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 570 571 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 589 Calculate the earnings per share for i) Income from Continuing Operations, ii) Net Income. 590 591 592 593 594 595 596 597 598 Prepare a statement of retained earnings at December 31, 2021. Round answers to the nearest whole number. 599 Holister Electric Inc. 600 Statement of Retained Earnings 601 For the Year Ended December 31, 2021 602 603 604 605 606 607 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 cboat 696 Holister Electric was able to find financial statements of another company, Stark Supplies Inc., that operates in the same industry. The 697 comparative income statement and balance sheet of this company is shown below. 698 699 700 Stark Supplies Inc. 701 Income Statement 702 For the Year Ended December 31 703 2021 2020 704 Sales Revenue $831,500 $858,000 705 Less Cost of Goods Sold 332,600 $343,200 706 Gross Profit 498,900 514,800 707 708 Operating Expenses 709 Operating Expenses $320,300 $325,600 710 Interest Expense $136,000 $109,000 711 Depreciation Expense 27.600 $25,500 712 Total Operating Expenses 483.900 460,100 713 Income from Operations 15,000 54,700 714 Income Tax Expense 4,200 15,316 715 Net Income 10,800 39,384 716 717 718 719 720 721 722 723 724 725 Stark Supplies Inc. Comparative Balance Sheet As at December 31 2021 2020 726 727 728 Assets 729 Current Assets 730 Cash $269,600 $286,500 724 725 Stark Supplies Inc. Comparative Balance Sheet As at December 31 726 727 2021 2020 $269,600 180,100 59,000 96,000 $604,700 $286,500 141,000 67,000 86,000 $580,500 495,000 -272.600 222.400 $827.100 489,000 -245,000 244,000 $824,500 728 Assets 729 Current Assets 730 Cash 731 Accounts Receivable 732 Prepaid Insurance 733 Inventory 734 Total Current Assets 735 urr Assets 736 Property, Plant & Equipment 737 Accumulated Depreciation 738 Total Non-Current Assets 739 Total Assets 740 741 Liabilities 742 Current Liabilities 743 Accounts Payable 744 Unearned Revenue 745 Total Current Liabilities 746 Non-Current Liabilities 747 Bank Loan 748 Total Non-Current Liabilities 749 Total Liabilities 750 751 Shareholders' Equity 752 Common Shares 753 Retained Earnings 754 Total Shareholders' Equity 755 Liabilities & Shareholders' Equity 97,100 37,100 $134,200 94.800 32.600) $127,400 91,300 91.300 225,500 94,000 94,000 221,400 181.000 422.100 195,000 406,600 601,600 $827.100 603,100 $824,500 759 757 Using the income statement and balance sheet from Holister Electric and Stark Supplies, calculate the appropriate ratios to determine 758 which company is doing better in the categories listed below. Round all ratios to 2 decimal places. Write your explanations in the textbox. 760 761 a) profitability for 2021 (gross profit margin, net profit margin, ROE, ROA, asset turnover) 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 b) liquidity for 2021 (current ratio, quick ratio, debt-to-equity) 778 779 780 781 782 783 784 785 786 787 788 789 790 776 777 b) liquidity for 2021 (current ratio, quick ratio, debt-to-equity) 778 779 780 781 782 783 784 785 786 787 788 789 790 791 c) management performance (DSO, A/R turnover, inventory days on hand, inventory turnover) 792 793 794 795 796 797 798 799 800 801 802 803 804 805 d) Analyze and compare the performance of the two companies using at least two ratios from each category. (The analysis is not 806 expected to exceed 250 words). 807 808 652 Using the balance sheet from the end of last year (when the company was still a proprietorship) and the balance sheet just created, 653 prepare a cash flow statement using the indirect method. Round answers to the nearest whole number. 654 Note: No Property, Plant and Equipment was sold during the year. 655 Hint : Amortized bond discount or premium should be added to the operating activities, if there is any. Carrying amount of the bonds 656 should be presented in the financing activities. 657 658 659 Holister Electric Inc. 660 Cash Flow Statement 26 Marks 661 For the Year Ended December 31, 2021 662 663 664 665 666 667 668 669 670 671 672 673 674 675 676 677 678 679 680 681 682 683 684 685