Parts C-E, professor gave us this for a inflated grade and we haven't covered this yet and I'm struggling to answer parts C-E.
estments mulder eviane The club, LifePath Fitness, opens on January 12, 2017, and after a slow start begins to produce the revenue desired by the owners. The owners decide to pay themselves a stock dividend since cash has been less than abundant since they opened their doors. The 10% stock dividend is declared by the owners on July 27, 2017. The market price of the stock is $3 on the declaration date. The date of record is July 31, 2017 (there have been no changes in stock ownership since the initial issuance), and the issue date is August 15, 2017. By the middle of the fourth quarter of 2017, the cash flow of LifePath Fitness has improved to the point that the owners feel ready to pay themselves a cash dividend. They declare a $0.05 cash dividend on December 4, 2017. The record date is December 14, 2017, and the payment date is December 24, 2017. Instructions (c) (1) Record all of the transactions related to the common stock of LifePath Fitness during the years 2016 and 2017. (2) Indicate how many shares are issued and outstanding after the stock dividend is issued. Part IV Since the club opened, a major concern has been the pool facilities. Although the existing pool is adequate, Debby, Jamie, and Ella all desire to make LifePath a cutting-edge facility. Until the end of 2017, financing concerns prevented this improvement. However, because there has been steady growth in clientele, revenue, and income since the third quarter of 2017, the owners have explored possible financing options. They are hesitant to issue stock and change the ownership mix because they have been able to work together as a team with great effectiveness. They have formu- lated a plan to issue secured term bonds to raise the needed $600,000 for the pool facilities. By the end of December 2017, everything was in place for the bond issue to go ahead. On January 1, 2018, the bonds were issued for $548,000. The bonds pay annual interest of 6% on January 1 of each year. The bonds mature in 10 years, and amortization is computed using the straight-line method. Instructions (d) Record (1) the issuance of the secured bonds, (2) the adjusting entry required at December 31, 2018, (3) the interest payment made on January 1, 2019, and (4) the interest accrued on Decem- ber 31, 2019. Part V Mr. Hansen's purchase of the stock of LifePath Fitness was done through his business. The stock investment has always been accounted for using the cost method on his firm's books. However, early in 2019 he decided to take his company public. He is preparing an IPO (initial public offering) and he needs to have the firm's financial statements audited. One of the issues to be resolved is to restate the stock investment in LifePath Fitness using the equity method since Mr. Hansen's owner- ship percentage is greater than 20%. Instructions (e) (1) Give the entries that would have been made on Hansen's books if the equity method of account- ing for investments had been used from the initial investment through 2018. Assume the following data for LifePath. 2016 2017 2018 Net income $30,000 $70,000 $105,000 Total cash dividends $ 2,100 $20,000 $ 50,000 (2) Compute the balance in the Stock Investment account (as it relates to LifePath Fitness) at the end of 2018
