Please help/guide me on creating entries/adjusting statements. I LEAVE FEEDBACK
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To practice recording the disposal and purchase of PPE and to determine the effects of these transactions on the financial statements. (See Topic Guides A 22, 25, 42, 43). Information: On December 15th, Dover's management was approached by a vendor offering them a chance purchase a specialized set of assets for only $754,000. The set includes two machines, one that retails for $329,000 and one that retails for $339,000, a custom conveyor belt that the vendor estimates has a retail value of $222,000, and a small storage facility with an estimated market value of $170,000. The vendor has offered Dover this deal because the company that ordered the units (one Dover's competitors) has declared bankruptcy. To make room for the new equipment, Dover has decided to sell off an old, cumbersome piece of equipment that will be replaced the new machines. The old equipment was originally purchased for $247,000 and has been fully depreciated to its estimated salvage value of $25,935. Dover's sales department was able to sell the old machine for $23,577, a pretty good deal considering the change in production methods and the improvements in technology. Although the deal was completed on December 29th, no journal entries have yet been recorded. Before you start, you should know that Dover's finance team has decided to round all percentages used for assigning values to assets to 3 decimal places. Dover's management would like to know the effect of your adjustment on the following ratios: Asset Turnover (Net Sales / average total assets) . Current Ratio ROA Assignment: Calculations 1. Calculate each of the three (3) ratios before you make any adjustments. 2. Make the appropriate journal entries, if any, to account for the trade-in (including any necessary changes to income tax expense). 3. Make any necessary changes to the financial statements. 4. Calculate the three (3) ratios after you make any adjustments. Dover Co. Multi-Step Income Statement For Year Ended December 31, 2020 Sales Revenue Sales Revenue Less: Sales Discounts $349,200 Sales Returns $1,382,250 Net Sales Revenue $29.100.000 $1.731.450 $27,368,550 Cost of Goods Sold Cost of Goods Sold Gross Profit $15,876,201 $11.492,349 $545,625 $37.830 $141,863 $400.125 $1,455,000 $238.256 $2,818,699 Operating Activities Selling Expenses Advertising Expense Bad Debt Expense Miscellaneous Selling Expenses Sales Force Salaries Expense Selling Commissions Expense Shipping Expense Total Selling Expenses Administrative Expenses Executive Salaries Expense Depreciation Expense Insurance Expense Miscellaneous Admin. Expenses Office Supplies Expense Consulting and Legal Fees Utilities Expense Total Administrative Expenses Income from Operations $1,273,125 $1,746,000 $250,988 $14,368 $112.763 S18,188 $218.250 $3,633,682 $6,452,381 $5,039,968 Other Gains and Losses Rent Revenue Gain on Sale of A/R Interest Expense Income from Continuing Operations before Taxes Income Tax Expense Net Income $90,938 SO ($185,513) (594,575) $4,945,393 ($1,494,967) $3,450,426 EPS $ 1.05 Balance Sheet As of 12/31/2020 2020 2019 $1,256,000 $2,619,000 ($183,330) SO $3,517,600 $368,250 $363,750 $7,941,270 $1,455,000 $2,473,500 (S727,500) SO $4,074,000 $436,500 $291,000 $8,002,500 Current Assets Cash AIR Allowance for Bad Debts Due from First National Bank Inventory Prepaid Insurance Prepaid Utilities Total Current Assets Long-term Investments Loans to other businesses Expansion Fund Total Long-term Investments PPE Land Building Equipment Accumulated Depreciation Total PPE Intangible Assets Patents Total Assets $1,164,000 $873,000 $2,037,000 $1,164,000 $873,000 $2,037,000 $3,201,000 $2,328,000 $8,148,000 ($4.656.000) $9,021,000 $2,037,000 $2,328,000 $3.783,000 2.910.000) $5,238,000 $436,500 $436,500 $19.435.770 $15.714.000 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $396,562 $1,746,000 Income Tax Payable $524,832 $291,000 Unearned Revenue $727,500 5436,500 Wages Payable $349,200 $363,750 Current Portion of Loan Payable $145,500 $145,500 Total Current Liabilities $2,143,594 $2.982,750 Long-term Debt Loan Payable $727,500 5873,000 Notes Payable $4.074.000 $2.328.000 Total Long-term Debt $4.801.500 $3.201.000 Total Liabilities $6,945,094 $6,183,750 Stockholders' Equity Common Stock $3,300,000 $3,300,000 ($1 par, $6,600,000.00 authorized, $3,300,000 outstanding Additional Paid-In Capital 5873,000 5873,000 Retained Earnings $8.317,676 $5.357.250 Total Stockholders' Equity $12.490.676 $9.530.250 Total Liabilities and Stockholder's Equity $19.435.770 $15.714.000 Dover Co. Statement of Cash Flows For Year Ended December 31, 2020 Cash Flow from Operations Net Income $3,450,426 Adjustments: Change in A/R ($689,670) Change in Inventory $556,400 Change in Prepaid Insurance $68,250 Change in Prepaid Utilities (572,750) Depreciation $1,746,000 Gain on Sale of A/R SO Change in A/P ($1,349,438) Change in Income Tax Payable $233,832 Change in Unearned Revenue $291,000 Change in Wages Payable ($14.550) $769,074 Net Cash Flow from Operations $4,219,500 Cash Flow from Investments Sale of A/R Purchase of Land Purchase of Equipment Net Cash Flow from Investments $0 ($1,164,000) ($4.365.000) ($5,529,000) Cash Flow from Financing Repayment of Loans Issuance of Notes Payable Payments of Dividends Net Cash Flow from Financing ($145,500) $1,746,000 ($490.000) $1.110.500 Net Increase (Decrease) in Cash Cash, January 1, 2020 Cash, December 31, 2020 ($199,000) $1.455.000 $1.256.000
