Prepare Journal Entries for Company and Cash Flow Statement.

1 Prepare journal entries for ABC Co.'s following events. 05/12/08 Received charter authorizing ABC Co. to issue 40,000 shares of common stock at a par value of $2 per share. 06/03/08 Issued 18,000 shares of stock, receiving $40,000. 06/04/08 Paid the law firm of Lo, Ball and Hyde for their services to help organize the company by sending them one thousand shares of stock. 11/15/08 Declared a cash dividend of $3 per share, payable on 01/15/09, to holders of record as of 12/15/08. 12/15/08 Make the appropriate entry. 12/31/08 Make any necessary adjusting entry. 01/15/09 Make the appropriate entry. 06/12/09 Declared a ten percent (10%) stock dividend, payable on 7/15/09 (ignore the date of record for this event). The market value of the stock is $20 per share. 07/15/09 Make the appropriate entry. 08/15/09 Declared a twoforone stock split. The market value of the stock is $22 per share. 09/15/09 Declared and paid a cash dividend of $2 per share (pretend this happens all in one day). 10/01/09 Purchased 2,000 shares of treasury stock for a total price of $40,000. 10/15/09 Declared and paid a cash dividend of $2 per share. 11/15/09 Reissued 400 shares of treasury stock at $32 each. 12/15/09 Reissued the remaining treasury stock at $9 per share. V. Required Prepare a cash flow statement for 2014 with clear documentation (i.e., show your work) for each section of the statement. Use either the direct or the indirect method. Additional information 1. There were no writeoffs of delinquent accounts during the year. 2. A building was sold during the year for $120. 2 V. (continued) Comparative balance sheets and an income statement for 2014 are presented below for Nroklesah Company. Nroklesah Company Comparative Balance Sheets and Income Statement For the Years 2013 and 2014 BALANCE SHEETS Assets 2014 2013 Cash $ 200 $ 285 Accounts receivable 350 300 Allowance for bad debts (40) (25) Inventory 100 135 Land 600 500 Buildings 275 255 Accumulated depreciationbuildings (75) (80) Total assets $1,410 $1,370 Liabilities & Owners' Equity Liabilities Accounts payable Wages payable Dividends payable Taxes payable Longterm Bonds payable Premium on bonds payable Total liabilities Owners' Equity Common stock Retained earnings Total owners' equity Total liabilities & owners' equity INCOME STATEMENT (2008) Revenue Cost of goods sold Gross margin Operating expenses Wage expense Depreciation expense Bad debt expense Bond interest expense Total operating expenses Net operating income $ 300 $ 305 70 60 30 25 50 45 100 100 7 10 557 545 650 600 203 225 853 825 $1,410 $1,370 $1,500 850 650 $171 40 15 14 240 410 3 Gain on sale of building Net income before tax Income tax Net income after tax 60 470 141 $ 329 ABC Co. JOURNAL ENTRIES Date Description DR CR 5/12/2008 Unissued common stock $ 80,000 Authorized common stock $ 80,000 being charter received authorizing ABC Co. to issue 40,000 shares of common stock at a 6/3/2008 Cash a/c $ 40,000 Common stock a/c $ 36,000 Additional paid in capital $ 4,000 (being issue of 18,000 shares of stock) 6/4/2008 Organization fees $ 2,000 Common stock $ 2,000 (being 1,000 shares of $2 par value of stock distributed to the law firm of Lo, Ball and H 11/15/2008 Retained earnings a/c $ 57,000 Dividends payable $ 57,000 (being declaration of a cash dividend of $3 per share payable on 01/15/2009) 12/15/2008 Dividend declared $ 57,000 Dividends distributable $ 57,000 (being confirmation of the exact amount of dividends to be distributed on 01/15/2009) 12/31/2008 P & L a/c- Dividends expense $ 57,000 Dividends payable $ 57,000 (being recording of the dividend as an expense and recognition of liability to pay divide 1/15/2009 Dividend payable $ 57,000 Cash $ (being the actual payment of cash as a dividend) 57,000 6/12/2009 Retained earnings $ 38,000 Common stock dividend distributable $ 3,800 Additional paid in capital in excess of par $ 34,200 (being declaration of 10% stock dividend, payable on 7/15/09) 7/15/2009 Common stock dividend distributab $ 3,800 Common stock $ (being the actual distribution of shares to shareholders) 3,800 8/15/2009 No debit/credit entry for stock splits. MEMORANDUM ENTRY: "A 2-for-1 stock split was declared for the common stockholde of the day May 8/15/09. The stock split will result in the number of issued and outsta shares increasing from 20, 900 shares to 41,800 shares. The par value per share dec 9/15/2009 Retained earnings a/c $ 83,600 Dividends payable $ (being declaration of a cash dividend of $2 per share) 83,600 Dividend payable $ 83,600 Cash $ (being the actual payment of cash as a dividend) 83,600 10/1/2009 Treasury stock $ 40,000 Cash $ 40,000 (being repurchase of 2,000 shares at a total of $40,000. repurchase price= 40,000/2,000 10/15/2009 Retained earnings a/c $ 87,600 Dividends payable $ (being declaration of a cash dividend of $2 per share) 87,600 Dividend payable $ 87,600 Cash $ (being the actual payment of cash as a dividend) 87,600 11/15/2009 Cash $ 12,800 Treasury stock $ 8,000 Additional paid in capital $ 4,800 (being Reissued 400 shares of treasury stock at $32 each-above cost.) 12/15/2009 Cash $ 14,400 Additional paid in capital $ 17,600 Treasury stock $ 32,000 (being Reissued 1600 shares of treasury stock at $32 each-below cost.) shares of common stock at a par value of $2 per share.) he law firm of Lo, Ball and Hyde for their services to help organize the company) le on 01/15/2009) distributed on 01/15/2009) tion of liability to pay dividends in the income statement) d for the common stockholders of record as of the end number of issued and outstanding shares of common . The par value per share decreased from $2 to $1." purchase price= 40,000/2,000=$20 per share) below cost.) $ (161,000) ABC Co. STATEMENT OF CASHFLOWS FOR YEAR ENDED 31 DECEMBER 2014 (Indirect Method) Cash provided/used by operating activities $ Net income Adjust for non-cash items: Depreciation expense $ 40.00 Adjust for changes in assets: increase in accounts receivable(350-300) $ (50.00) decrease in inventory(135-100) $ 35.00 Adjust for changes in liabilities: increase in Salaries and wages payable(70-60) $ 10.00 decrease in Income taxes payable(50-45) $ (5.00) decrease in accounts payable(305-300) $ (5.00) increase in allowance for bad debts(40-25) $ (15.00) Increase in dividends payable(30-25) $ 5.00 decrease in premium on bonds payable $ (3.00) other adjustments: wages expense $ (171.00) Cash provided by operating activities Cash provided/used by investing activities Acquisition of land(600-500) Gain on sale of buildings Sale of buildings Cash provided by investing activities Cash provided/used by financing activities bond interest expense cash from issue of shares cash dividends paid cash dividends paid Repurchase of stock cash dividends paid reissue of treasury stock reissue of treasury stock Cash in the beginning cash at the year end $ $ $ $ $ $ $ $ $ $ $ $ $ 329.00 $ 12.00 $ $ (171.00) 170.00 $ (40.00) (14.00) 40.00 (57.00) (83.60) (40.00) (87.60) 12.80 14.40 $ $ $ $ (215.00) (85.00) 285.00 200.00 (100.00) (60.00) 120.00 ABC Co. JOURNAL ENTRIES Date Description DR CR 5/12/2008 Unissued common stock $ 80,000 Authorized common stock $ 80,000 being charter received authorizing ABC Co. to issue 40,000 shares of common stock at a 6/3/2008 Cash a/c $ 40,000 Common stock a/c $ 36,000 Additional paid in capital $ 4,000 (being issue of 18,000 shares of stock) 6/4/2008 Organization fees $ 2,000 Common stock $ 2,000 (being 1,000 shares of $2 par value of stock distributed to the law firm of Lo, Ball and H 11/15/2008 Retained earnings a/c $ 57,000 Dividends payable $ 57,000 (being declaration of a cash dividend of $3 per share payable on 01/15/2009) 12/15/2008 Dividend declared $ 57,000 Dividends distributable $ 57,000 (being confirmation of the exact amount of dividends to be distributed on 01/15/2009) 12/31/2008 P & L a/c- Dividends expense $ 57,000 Dividends payable $ 57,000 (being recording of the dividend as an expense and recognition of liability to pay divide 1/15/2009 Dividend payable $ 57,000 Cash $ (being the actual payment of cash as a dividend) 57,000 6/12/2009 Retained earnings $ 38,000 Common stock dividend distributable $ 3,800 Additional paid in capital in excess of par $ 34,200 (being declaration of 10% stock dividend, payable on 7/15/09) 7/15/2009 Common stock dividend distributab $ 3,800 Common stock $ (being the actual distribution of shares to shareholders) 3,800 8/15/2009 No debit/credit entry for stock splits. MEMORANDUM ENTRY: "A 2-for-1 stock split was declared for the common stockholde of the day May 8/15/09. The stock split will result in the number of issued and outsta shares increasing from 20, 900 shares to 41,800 shares. The par value per share dec 9/15/2009 Retained earnings a/c $ 83,600 Dividends payable $ (being declaration of a cash dividend of $2 per share) 83,600 Dividend payable $ 83,600 Cash $ (being the actual payment of cash as a dividend) 83,600 10/1/2009 Treasury stock $ 40,000 Cash $ 40,000 (being repurchase of 2,000 shares at a total of $40,000. repurchase price= 40,000/2,000 10/15/2009 Retained earnings a/c $ 87,600 Dividends payable $ (being declaration of a cash dividend of $2 per share) 87,600 Dividend payable $ 87,600 Cash $ (being the actual payment of cash as a dividend) 87,600 11/15/2009 Cash $ 12,800 Treasury stock $ 8,000 Additional paid in capital $ 4,800 (being Reissued 400 shares of treasury stock at $32 each-above cost.) 12/15/2009 Cash $ 14,400 Additional paid in capital $ 17,600 Treasury stock $ 32,000 (being Reissued 1600 shares of treasury stock at $32 each-below cost.) shares of common stock at a par value of $2 per share.) he law firm of Lo, Ball and Hyde for their services to help organize the company) le on 01/15/2009) distributed on 01/15/2009) tion of liability to pay dividends in the income statement) d for the common stockholders of record as of the end number of issued and outstanding shares of common . The par value per share decreased from $2 to $1." purchase price= 40,000/2,000=$20 per share) below cost.) $ (161,000) ABC Co. STATEMENT OF CASHFLOWS FOR YEAR ENDED 31 DECEMBER 2014 (Indirect Method) Cash provided/used by operating activities $ Net income Adjust for non-cash items: Depreciation expense $ 40.00 Adjust for changes in assets: increase in accounts receivable(350-300) $ (50.00) decrease in inventory(135-100) $ 35.00 Adjust for changes in liabilities: increase in Salaries and wages payable(70-60) $ 10.00 decrease in Income taxes payable(50-45) $ (5.00) decrease in accounts payable(305-300) $ (5.00) increase in allowance for bad debts(40-25) $ (15.00) Increase in dividends payable(30-25) $ 5.00 decrease in premium on bonds payable $ (3.00) other adjustments: wages expense $ (171.00) Cash provided by operating activities Cash provided/used by investing activities Acquisition of land(600-500) Gain on sale of buildings Sale of buildings Cash provided by investing activities Cash provided/used by financing activities bond interest expense cash from issue of shares cash dividends paid cash dividends paid Repurchase of stock cash dividends paid reissue of treasury stock reissue of treasury stock Cash in the beginning cash at the year end $ $ $ $ $ $ $ $ $ $ $ $ $ 329.00 $ 12.00 $ $ (171.00) 170.00 $ (40.00) (14.00) 40.00 (57.00) (83.60) (40.00) (87.60) 12.80 14.40 $ $ $ $ (215.00) (85.00) 285.00 200.00 (100.00) (60.00) 120.00