Below is the Balance Sheet of Rick and Morty Inc. as of December $31,2023.$

$\backslash$taBelow is the Balance Sheet of Rick and Morty Inc. as of December $31,2023.$

Amounts in $ millions Amount Amount

Assets

Cash and cash equivalents $550$

Accounts receivable $240$

Inventory $140$

Prepaid insurance $10$

Property, plant and equipment

Buildings $400$

Less: Accumulated depreciation $(20)380$

Plant and equipment $600$

Less: Accumulated depreciation $(60)540$

Patents $40$

Total Assets $1,900$

Liabilities

Accounts payable $200$

Salaries payable $360$

Interest payable $20$

Income tax payable $40$

Deferred tax liabilities $20$

Net pension benefit obligation $200$

Bonds payable $600$

Total liabilities $1,440$

Shareholders$$ equity

Common stock $30$

Paid$-$in$-$capital $$ Excess of par $120$

Paid$-$in$-$capital $$ stock options $1$

Paid$-$in$-$capital $$ repurchases $9$

Retained earnings $300$

Less: Treasury stock $(20)440$

Preferred stock $20$

Total shareholders$$ equity $460$

Total liabilities and shareholders$$equity $1,900$

Beginning balance information$-$

$1.$ Bonds include a $15-$year $$600$ million bond issued in $2023.$ The market value of the bonds was $$600$ million at the time of the issue. The market rate of interest and stated interest rate were the same at $10\%.$ There is no change in the market rate of interest for these bonds.

$2.$ Buildings and plant & equipment were acquired in the previous year at the beginning of the year.

$3.$ Common shares outstanding at the beginning of the year were $3,000,000$ shares with a $$10$ par value.

$4.$ The company had also granted $200,000$ options, which were vested on December $31,2023.$ On March $31,2024,$ these options were exercised at the agreed exercise price of $$45.$ The beginning balance in the $$Paid$-$in$-$capital $$ stock options$$ account represents these $20,000$ options.

The transactions and additional relevant information for Rick and Morty Inc. for the year ended December $31,2024,$ are as follows: Create journal entries for the following.

$1.$ The company earned $$1,600$ million in sales revenue during the year. $70\%$ of the sales revenue was received in cash, while $30\%$ was on credit. The credit sales amount is still receivable at the end of the year.

$2.$ The company also sold plant and equipment at the end of the year with acquisition cost of $$25$ million. There was a profit of $$30$ million on this sale.

$3.$ The cost of goods sold is $$320$ million. Inventory at the end of the year is $$120$ million. $80\%$ of the purchases were in cash, and $20\%$ of the purchases were on account, still payable at the end of the year.

$4.$ Employee compensation other than pension and other post$-$retirement benefits amounted to $$300$ million. The compensation for each month is paid at the beginning of the next month.

$5.$ The company uses straight$-$line depreciation for both buildings and plant & equipment. The useful life of buildings is $20$ years, and of plant & equipment is $10$ years. There is no expected salvage value. The amortization on patents is $$10$ million.

$6.$ Insurance expense for the year is $$40$ million. Prepaid insurance at the end of the year is $$20$ million.

$7.$ The income tax rate is $25\%.$ For income tax reporting, the company was allowed to claim

a$.50\%$ depreciation on buildings each year in the first two years.

b$.40\%$ and $60\%$ depreciation on plant and equipment in the first and second years.

c$.$ Sales revenue is taxed on cash basis

$8.$ Pension benefits

a$.$ Projected benefit obligation details are as follows$-$

Amount $($$ million$)$

Beginning balance $600$

Service cost $350$

Interest cost $60$

Prior service cost $20$

Loss on PBO $15$

Benefits paid $(100)$

Ending balance $945$

b$.$ Plan assets details are as follows$-$

Amount $($$ million$)$

Beginning balance $400$

Actual return $60$

Actual contribution $440$

Benefits paid $(100)$

Ending balance $800$

The long$-$term expected rate of return is $10\%.$ The average remaining service life of employees is expected to be $20$ years.

$9.$ Leases

a$.$ The company enters into a lease on January $1,2024,$ that is accounted for as a finance lease. The lease calls for quarterly payments of $$100,000,$ beginning on January $1,2024,$ and continuing for $5$ years. The last payment is due on October $1,2028.$ The lease has an implicit annual interest rate of $7\%.$ The present value of an annuity due at $7\%$ per period for $5$ periods is $4\mathrm{.}387$; the present value of an annuity due at $1\mathrm{.}75\%$ per period for $20$ periods is $17\mathrm{.}046.$

b$.$ The company leased high$-$tech electronic equipment from Wacha Leasing on January $1,2024.$ Wacha Leasing purchased the equipment from Red Bird Machines at a cost of $$3,850,000($also the fair value$).$ The equipment has an estimated useful life of six years and possession of the equipment will revert back to Wacha at the end of the lease.

Lease term $3$ years $(12$ quarterly periods$)$

Quarterly rental payments $$200,000$ at the beginning of each period

Economic life of asset $6$ years

Implicit interest rate $8\%$

c$.$ The company also entered into another finance lease. The lease agreement qualifies as a finance lease and calls for semiannual lease payments of $$202,520$ over a five$-$year