PLEASE DO PART 3

EEE PART Ill Jamir took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used for large production companies, Hyhier Electric Inc.. He employs several people, but is looking to expand his operations further. In addition to expanding the sales of electrical parts, he also wants to start selling heating, ventilation and air conditioning (HVAC) parts and machinery through a separate division of the company called 'HVAC Parts & Machinery.' Currently, Jamir owns all the shares in the corporation. To raise the needed cash, he decides to offer common and preferred shares for sale to investors starting in 2024. Below is the balance sheet at the end of 2023. Hyhier Electric Inc. Balance Sheet As at December 31, 2023 Assets Liabilities Cash $102,800 Accounts Payable $52,410 Accounts Receivable 66,890 Unearned Revenue 23,000 Prepaid Insurance 9,600 Bank Loan 37,700 Merchandise Inventory 66,500 Total Liabilities 113,110 Property, Plant & Equipment 302,000 Shareholders' Equity Accumulated Depreciation -62,400 Common Shares - 95,000 issued 95,000 Retained Earnings 277,280 Total Shareholder's Equity 372,280 Total Assets $485,390 Liabilities & Owner's Equity $485,390 At 2023, Jamir has authorized 186,000 common shares and 28,000 preferred shares. The preferred shares will be cumulative and pay $10 dividends. The 95,000 shares issued were issued to Jamir. He will maintain control of the company and sit on the board of directors. Transactions during 2024 a) On January 1, Hyhier purchased a strategic investment of 7,200 shares in Kmax Inc. for $32 per share. This represents 35% of Kmax Inc. common shares. On December 31, Kmax Inc. declares and pays a $300,000 dividend and reports a net income of $420,000. Hyhier will use the equity method to record this investment. b) On January 1, Jamir has located a few private investors that wish to purchase shares in the new corporation. Some want common shares, while other are interested in preferred shares. Hyhier Electric Inc. issued 50,000 common shares for $200,000 cash and issued 8,600 preferred shares for $77,400 cash. c) On March 1, Hyhier Electric Inc. issued and sold $315,000, 6 year bonds with an interest rate of 10%. The market rate at the time of issue was 11%. Any premium or discount on the bond is amortized using the effective interest rate method. Interest will be paid annually on February 28. The Present value of 1 and annuity of 1 of 11% for 6 periods are 0.5346 and 4.2305, respectively. Use a 4 decimal factor for the bond calculation. d) On April 1, the company has extra cash on hand and would like to invest it in short-term bonds issued by Cargo Ltd. The company bought 30, $3,500 short term (one-year) bonds at par on this date and intended to sell these bonds before maturity. The interest rate on the bond is 12%, payable annually at March 31. On December 31, 2024, each bond was trading in the market at $4,200. On January 1, 2025, all bonds were sold for $99,750. e) On July 1, Hyhier purchased a $98,600, 7 year bond paying 10%. Interest is paid every 6 months on December 31 and June 30. The company plans to hold onto the bond until it matures. f) On November 23, the company purchased 6,400 shares of D'House Inc. at $36 per share for the purpose of trading. The shares are less than 11% of the total shares of D'House Inc. and are a non-strategic investment. By December 31, the price per share had gone up to $39 per share. g) During 2024, Hyhier Electric Inc. has performed well, so the board of directors decided to pay dividends. On November 30, 2024, the company declared cash dividends of $120,000, which will be paid out on December 15, 2024. Use the cash dividends method and close cash dividends at the end of the year. Prepare the journal entries for the issue of shares, issue of the bonds and the dividends, plus all the investments made during the year, 2024 . Also prepare adjustments at year end to accrue interest on the bond and to record change to any applicable investments. Date Account Title and Explanation DR CRAt the end of the year, Hyhier Electric Inc. has adjusted Trial balance. - The expansion into HVAC did not go as planned and had to be discontinued. - Below is the updated and correct balances taking into consideration the transactions happened during the year (including day-to-day transactions and the transactions above). - Complete the list by filling in the missing values from the journal entries you created during the year. *Interest payable, interest receivable ,and interest revenue balances are from the bonds issued and purchased during the year. Interest expense from bank loan are paid within the year. Assume the tax rate is 33%. Assume income tax has already been paid. You will just have to calculate the income tax expense on the income statement. Hyhier Electric Inc. Adjusted Trial Balance December 31, 2024 Account Title Cash Accounts Receivable Interest Receivable $309,239 $86,620 $9,450 Prepaid Insurance Short-Term Investment - D'House Inc. Short-Term Investments - Bonds Valuation Allowance for Fair Value Adjustment Merchandise Inventory Investment in Kmax Inc. Common shares $26,000 $230,400 $105,000 $40,200 $133,850 $272,400 Long-Term Investment - Bond $98,600 Discount on Bonds Property, Plant & Equipment Accumulated Depreciation Accounts Payable Interest Payable Unearned Revenue Premium on Bonds Bonds Payable Bank Loan 11,937 $338,200 $95,651 $198,000 $26,250 $23,000 $315,000 $235,000 Common Shares $295,000 Preferred Shares Retained Earnings Interest Revenue Revenue from Investment in Kmax Inc. Unrealized Gain on Fair Value Adjustment Income Tax Savings - Discontinued Operations Sales Revenue Sales Discounts 77,400 $157,280 $14,380 $147,000 $40,200 $12,718 $1,166,000 $62,450 Sales Returns and Allowances $81,400 Cost of Goods Sold Depreciation Expense Insurance Expense Interest Expense Loss from Discontinued Operations Maintenance Expense $489,720 $33,251 $18,870 $46,453 $38,540 $42,150 Professional Fees Expense $30,120 Rent Expense $49,950 Salaries Expense $75,540 Telephone Expense $4,210 Travel Expense $37,740 Income Tax Expense - Continuing Operations $130,590 Unrealized Loss on Fair Value Adjustment Tota $2,802,879 $2,802,879 Notes: The bank loan is payable over 5 years and $47,000 will be paid by December 31, 2025. The interest on this loan is 8% per annum. Prepare a multistep income statement for the year ending December 31, 2024. Round answers to the nearest whole number. 29 Marks Hyhier Electric Inc. Income Statement For the Year Ended December 31, 2024 check fig 239,315 net incomeCalculate the earnings per share for I) income from continuing uperations, II) Net Income. Prepare a statement of retained earnings at December 31, 2024. Round answers to the nearest whole number. Hyhier Electric Inc. Statement of Retained Earnings For the Year Ended December 31, 2024 check fig 396,595 ending R/E Prepare a Classified Balance Sheet at December 31, 2024. Round answers to the nearest whole number. Hyhier Electric Inc. Balance Sheet 32 Marks As at December 31, 2024check fig 1,554,308 A=L+SH Using the balance sheet from the end of last year (when the company was still a proprietorship) and the balance sheet just created, prepare a cash flow statement using the indirect method. Round answers to the nearest whole number. Note: No Property, Plant and Equipment was sold during the year. Hint : Amortized bond discount or premium should be added to the operating activities, if there is any. Carrying amount of the bonds should be presented in the financing activities. Hyhier Electric Inc. Cash Flow Statement For the Year Ended December 31, 2024 26 Marks Hyhier Electric Inc. was able to find financial statements of another company, Sunlight Electric Inc., that operates in the same industry. The comparative income statement and balance sheet of this company is shown below. Sunlight Electric Inc. Income Statement For the Year Ended December 31 2024 2023 Sales Revenue $740,440 $685,000 Less Cost of Goods Sold 303,580 $274,000 Gross Profit 436,860 411,000 Operating Expenses Operating Expenses $268,640 $291,710 Interest Expense $91,530 $86,320 Depreciation Expense $20,990 $18,900 Total Operating Expenses 381,160 396,930 Income from Operations 55,700 14,070 Income Tax Expense 18,381 1,643 Net Income 37,319 9,427 Sunlight Electric Inc. Comparative Balance Sheet As at December 31 2024 2023 Assets Current Assets Cash $178,740 $168,090 Accounts Receivable $138,890 $100,020 Prepaid Insurance $41,830 $49,590 Merchandise Inventory $69,980 $64,650 Total Current Assets $429,440 $382,350 Non-Current Assets Property, Plant & Equipment 390,950 90,950 Accumulated Depreciation 204,290 183,300 Total Non-Current Assets 186,660 207,650 Total Assets $616,100 $590,000 Liabilities Current Liabilities Accounts Payable $80,020 69,600 Unearned Revenue 25,250 21,680 Total Current Liabilities 105,270 $91,280 Non-Current Liabilities Bank Loan 71,420 72,490Total Non-Current Liabilities 71,420 72,490 Total Liabilities 176,690 163,770 Shareholders' Equity Common Shares 146,420 135,770 [Retained Earnings _Sss|~(292,990| 290,460] 439,410| 426,230 [Liabilities & Shareholders' Equity | $616,100| _$590,000| Using the income statement and balance sheet from Hyhier Electric Inc. and Sunlight Electric Inc., calculate the appropriate ratios to determine which company is doing better in the categories listed below. Round all ratios to 2 decimal places. Write your explanations in the textbox. a) Profitability for 2024 (gross profit margin, net profit margin, ROE, ROA, asset turnover) b) Liquidity for 2024 (current ratio, quick ratio, debt-to-equity) 7 Marks c) Management performance (DSO, A/R turnover, inventory days on hand, inventory turnover) 9 Marks d) Analyze and compare the performance of the two companies using at least two ratios from each category. (The analysis is not expected to exceed 250 words). 7 Marks Insert names of particpianting members here: Last chk'd: March 13, 2025