Financial Statement Homework #3 Name___________________

YOU MUST STAPLE YOUR PAGES TOGETHER!

Part 1: At November 30, 2015, Silver Traders Company had the following trial balance. There is detailed information on the next page about December 2015 transactions that need to be recorded.

Silver Traders Company

Trial Balance

11/30/15

	Dr	Cr
Cash	281,000
Accounts Receivable	62,000
Allowance for Doubtful Accounts		5,000
Short Term Note Receivable	24,000
Supplies	6,000
Inventory	65,000
Equipment	195,000
Building	0
Accumulated Depreciation		75,000
Copyright	44,000
Accounts Payable		45,000
Dividends Payable		0
Interest Payable		0
Unearned Revenue		40,000
ST Note Payable		15,000
LT Mortgage Payable		0
Bonds Payable		200,000
Premium on Bonds Payable		26,840
Common Stock - $1 par		3,000
Paid In Capital In Excess of Par CS		86,000
Preferred Stock - $5 par		1,000
Paid In Capital In Excess of Par PS		50,000
Treasury Stock	0
Retained Earnings		105,000
Dividends	5,000
Sales Revenue		819,000
Sales Returns & Allowances	3,840
Sales Discounts	9,000
Cost of Goods Sold	380,000
Bad Debts Expense	5,000
Depreciation Expense	50,000
Wages Expense	260,000
Rent Expense	63,000
Insurance Expense	16,000
Supplies Expense	6,000
Interest Revenue		1,000
Interest Expense	8,000
Gain on Sale of Equipment		15,000
Income Tax Expense	4,000
Total	1,486,840	1,486,840

Instructions: You must turn in the work performed on the sheets printed with this page. This WILL NOT BE ACCEPTED ON PLAIN PAPER.

Write the journal entries (on the following General Journal page) required for each of the events described below. Write the entries in the order described below (#1 - #8).

Use ONLY the accounts listed on the trial balance for your journal entries.

Post the transactions to individual T-accounts and prepare an adjusted trial balance for Silver Traders Company as of December 31, 2015.

1. The company purchased a building December 1, 2015 with a LT Mortgage Payable of $200,000 at 12% interest. (Record the purchase of the building.)

2. The company issued 500 shares of Common Stock for $4,000 on December 20, 2015. (Hint: Remember to consider the par value per share!)

3. On December 29, 2015 the company declared a cash dividend of $2.00 per share of common stock (including the additional 500 shares issued on December 20^th.)

4. The terms of the LT mortgage payable from #1 above require the company to make monthly installment payments over the term of the loan. Each payment consists of interest on the unpaid balance of the loan and a reduction of loan principal. Record the first monthly payment of $3,000 on the LT Mortgage Payable on December 31, 2015.

5. The company last paid interest on the ST note payable on November 30, 2015. Record the accrued interest expense for the last 1 month of 2015. The annual interest rate is 8%.

6. The Bonds Payable and related Premium amounts on the Nov. trial balance relate to the Jan. 1, 2015 issuance of the following bonds: On Jan. 1, 2015, the company issued 10%, 10-year bonds when the market rate for similar investments was 8%. The company pays interest each year on January 1^st. On Dec. 31, 2015, use the effective interest method of amortizing the premium on bonds payable to accrue the interest expense for 2015. Round your interest expense calculation to the nearest whole dollar.

7. The Unearned Revenue amount on the Nov. trial balance relates to amounts that the company previously collected in cash for sales that were to be completed in the future. The company completed some of these sales during December and now owes only $15,000 of that unearned revenue. Record the necessary adjustment for December 31, 2015.

8. On December 31, 2015, the company purchased 50 shares of its own Preferred Stock for Treasury Stock for $12 per share.

GENERAL JOURNAL

DATE	ACCOUNT NAME	DEBIT	CREDIT

Use the space below for T-accounts (REQUIRED).

(Specific instructions: Prepare T-accounts for each account affected by a journal entry. Write in the unadjusted balance for each of these accounts (from page 1)the unadjusted balance might be a debit, a credit, or zero balance. Now you are ready to post your journal entries from page 3 onto the corresponding T-accounts and then calculate adjusted balances.)

Silver Traders Company

ADJUSTED TRIAL BALANCE

12/31/15

	Dr	Cr
Cash
Accounts Receivable
Allowance for Doubtful Accounts
Short Term Note Receivable
Supplies
Inventory
Equipment
Building
Accumulated Depreciation
Copyright
Accounts Payable
Dividends Payable
Interest Payable
Unearned Revenue
ST Note Payable
LT Mortgage Payable
Bonds Payable
Premium on Bonds Payable
Common Stock - $1 par
Paid In Capital In Excess of Par CS
Preferred Stock - $5 par
Paid In Capital In Excess of Par PS
Treasury Stock
Retained Earnings
Dividends
Sales Revenue
Sales Returns & Allowances
Sales Discounts
Cost of Goods Sold
Bad Debts Expense
Depreciation Expense
Wages Expense
Rent Expense
Insurance Expense
Supplies Expense
Interest Revenue
Interest Expense
Gain on Sale of Equipment
Income Tax Expense
Total

What is the effect on the accounting equation when Treasury Stock is purchased?

Assets = Liabilities + Stockholders Equity

___________ = __________ + ______________ (fill in blanks with arrows to indicate what changes and in which direction)

How many Common Stock shares are outstanding at 12/31/2015? (HINT: Remember that the treasury shares purchased on 12/31/2015 were Preferred Shares, not Common Shares)

If this company had a common stock 3-1 stock split on Dec. 31, 2015:

How many shares would there be after the split?

What is the par value per share in dollars after the split?

Does the Carrying Value of the Bonds Payable and Premium increase or decrease over the life of the bonds?

What will be the balance in the Mortgage Payable Account at Jan. 31, 2016 after the second monthly payment is made?

The company is about to issue $2,000,000 of 5-year, 10% bonds. Interest will be paid semi-annually. The market interest rate for such securities is 12%. How much can the company expect to receive from the sale (issuance) of these bonds?

Part 2: NOTE: This is a DIFFERENT COMPANY. Using the trial balance below, complete the Multi-Step Income Statement and prepare the Statement of Retained Earnings and Classified Balance Sheet on the pages which follow. To get full credit you must include all critical subtotals.

Jackson Company

Adjusted Trial Balance

December 31, 2015

	DEBIT	CREDIT
Cash	3,800
Accounts Receivable	4,920
Allowance for Doubtful Accounts		1,340
Short term Note Receivable	400
Interest Receivable	40
Supplies	60
Inventory	6,000
Prepaid Expenses	300
Equipment	21,440
Accumulated Depreciation		3,940
Copyrights	1,200
Accounts Payable		1,340
Interest Payable		40
Unearned Revenue		100
Long Term Note Payable		2,800
Common Stock		15,200
Paid-in-Capital In Excess of Par - CS		1,600
Retained Earnings (1/1/15)		6,320
Dividends	1,200
Sales		73,600
Sales Returns & Allowances	80
Sales Discounts	120
Cost of Goods Sold	44,400
Bad debt expense	60
Depreciation Expense	1,540
Amortization Expense	140
Wages Expense	16,000
Rent Expense	1,000
Office Expense	160
Supplies Expense	200
Selling Expense	1,600
Interest Expense	400
Interest Revenue		300
Income Tax Expense	1,520
Totals	106,580	106,580

Jackson Company

Multi Step Income Statement

For the year ended December 31, 2015

(Be sure to include all the necessary headings, totals and subtotals as outlined in Chapter 5. You may not need to use all the lines provided. Note: The two columns below do not represent debit and credit balances like they do on a trial balance. On the Income Statement, use the right column for subtotals and totals.)

Jackson Company

Statement of Retained Earnings

For the year ended December 31, 2015

Jackson Company

Classified Balance Sheet

December 31, 2015

(Be sure to include all the necessary subtotals and totals as outlined in Chapter 2. You may not need to use all of the lines provided. Note: The two columns below do not represent debit and credit balances like they do on a trial balance. On the Balance Sheet, use the right column for subtotals and totals.)