Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

For parts and C below, your Company had the opportunity to obtain additional assets on May 1, 2021, but decided not to do it. The

image text in transcribedimage text in transcribed

For parts and C below, your Company had the opportunity to obtain additional assets on May 1, 2021, but decided not to do it. The assets which could have been acquired were: B. Buy a patent for $90,000 which is owned by one of your competitors. The patent has an 8 year remaining legal life, but you believe the products protected by the patent can be sold for more than 10 years. You would have spent an additional $8,000 to advertise the new product line. You would have purchased and paid for $100,000 of the new products during 2021. Your market research indicated you could have sold $75,000 of the products during 2021 for $140,000 on account. Your accounting department projected that you would have collected 80% of the accounts by the end of the year and that bad debts from these transactions would have been 1% of sales to these new customers. In order to help pay for all of the above, you would have borrowed $60,000 from your bank on May 1, 2021, and issued a 9%, 5 year note which would require payments of interest each year on April 30. C. Purchase a new building for $400,000 in cash. The building has an estimated life of 30 years and an estimated salvage value of $40,000. Your company would use the straight- line method of depreciation on the building. Had you purchased the new building, you would have saved $2,000 of rent expense EACH MONTH on your current building from May through December. It was projected that the location of the new building could have increased your sales (all in cash to local customers) by $80,000 and your cost of goods sold by $37,000 (and reduced your existing inventory) in 2021. In order to help pay for these transactions, you would have sold 6,000 new shares of common stock for $34 per share in cash on May 1, 2021. You would have declared a $2.00 cash dividend on these shares on December 1 and paid the cash dividend on December 19, 2021 (as described in transaction "q." in computer problem 2. 1. INSTRUCTIONS FOR PARTS B AND C Prepare the entries which would have been made to record the events of Alternative B, including any adjusting entries on December 31, 2021. No dates are needed on these entries since the sales would have been made throughout several months of the year 2021

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting And Finance For Non Finance Managers

Authors: Jai Kumar Batra

1st Edition

9352806964, 978-9352806966

More Books

Students also viewed these Accounting questions

Question

Gambling by student and professional athletes

Answered: 1 week ago

Question

Describe ERP and how it can create efficiency within a business

Answered: 1 week ago