Case Problem

Capricorn Inc. is a private company reporting under ASPE. Its unadjusted trial balance at its fiscal year end, December 31, 2023 is shown below:

Capricorn Inc. Unadjusted Trial Balance December 31, 2023
	Debit	Credit
Cash	$38,000
Inventory	46,500
Supplies	5,000
Building	600,000
Accumulated depreciation building		120,000
Equipment	330,000
Accumulated depreciation equipment		$66,000
Accounts payable		34,000
Dividends payable		0
Interest payable		0
Income tax payable		0
Unearned revenue		30,600
Bonds payable (maturity date January 1, 2029)		500,000
Preferred shares ($4 noncumulative, 1,000 issued)		40,000
Common shares (120,000 issued)		60,000
Retained earnings		73,000
Cash dividends preferred	0
Cash dividends common	0
Sales		515,000
Cost of goods sold	159,000
Depreciation expense	20,000
Income tax expense	0
Insurance expense	8,200
Interest expense	1,800
Rent expense	32,600
Salaries expense	185,000
Supplies expense	12,500
TOTALS	$1,438,600	$1,438,600

No new shares were issued or reacquired during 2023.

The following transactions have not yet been recorded for 2023: 1. On December 31, 2023, the board of directors declared a total cash dividend of $54,000 2. The bonds were issued at par with a contract interest rate of 4%. Interest is paid semi-annually on July 1 and January 1. 3. The income tax rate for 2023 is 20%

Required: Using a blank MS Excel workbook, answer the following questions:

1. Prepare the adjusting entries required for December 31, 2023 (7 marks) 2. Prepare the closing entries for December 31, 2023 (5 marks) 3. Prepare an income statement for the year ended December 31, 2023 (11 marks) 4. Prepare a statement of retained earnings for the year ended December 31, 2023 (5 marks) 5. Prepare a classified balance sheet at December 31, 2023 (17 marks) 6. Calculate Capricorns earnings per share for 2023. (3 marks)

Required:

Set up a table in MS Excel with all relevant information. Use the table to answer the following questions in MS Excel. Use Excel formulas to support your calculation whenever possible

1. Were the bonds issued at a discount or premium? How do you know?
2. What is the face value of the bonds?
3. What is the contractual rate of interest?
4. Calculate the missing amounts for items [1] through [5] in the amortization table
5. What was the market interest rate when the bonds were issued?
6. Prepare the journal entry to record the issue the bonds on January 1, 2023
7. Prepare the journal entry to record the first interest payment on July 1, 2023
8. Prepare the journal entry to record the accrual of interest on December 31, 2023
9. What amounts would be reported as current and as noncurrent liabilities on Mansons December 31, 2023 balance sheet?