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Rockland Property Development, Inc. recently completed its first year of operations selected accounts appearing on the post-closing trial balance as of December are presented below Rockland Property Development, Inc. Post-closing Trial Balance December 31, 20x1 Trading Securities Fair Value Adjustment (Tradingl Interest Receivable Notes Receivable "1" Available-for-Sale Securities 80,250 2,284 11,800 32,000 185,930 4,910 122,800 11,449 Held-to-Maturity Securities Office Furniture Accumulated depreciation-office furniture 630 7,560 puters Accumulated depreciation - computers Light duty equipment Accumulated depreciation - light duty equipment 2,195 240,000 18,000 700,000 131,250 Accumulated depreciation - heavy duty equipment Patent Goodwill Bond Issue Costs (Bond Payable "A" Notes payable "A" 77,175 100,000 2,565 8,400 472 Bonds Payable "A" (maturity date: October 1, 20x6) Premium on Bonds Payable "A" 400,000 2,736 6102-Cmp ACC COMPANY ACCOUNTING POLICIES 1) No reversing entries are used. 2) All numbers are rounded to the nearest dollar 3) The straight-line method of depreciation is used for all fixed assets, except where otherwi se stated. 4) Straight-ine amortization is used for all intangible assets and all bond investments; all are calculated to the nearest month. 5) Amortization methods for bonds payable will be indicated separately. 6) When band investments occur between interest payment dates (and accrued interest is paid) the interest receivable account is debited. d issuances occur between interest payment dates (and accrued interest is received) the interest payable account is credited. 7) When bon The company's fiscal year ends on December 31. Adjusting entries are prepared once a year, on 8) December 31. Additional information regarding items on the 12/31/x1 post-closing trial balance: 1) The trading securities portfolio consists of the following securities at 12/31/x1: cost at date of purchase Date of amount purchased 700 shares $ 450 shares purchase nski 7/28/x1 Security !Verdon Company stock 27 /share 33 /share Fosse Company stock 11/1/x1 Bennett Company bonds 44,00046,500 plus accrued interest face value Note: The Bennett Company bonds Interest is paid annually on July 1. mature on 12/31/xd. The stated interest rate is: Fair value information for the trading securities portfolio as of 12/31/x1: Security Fair value Verdon Company stock29 /share Fosse Company stock Bennett Company bonds 101.4% of par $29 /share ] Additional information regarding items on the 12/31/x1 post-closing trial balance: 5) Office furnture was acquired on January 1,20x1. Terms of purchase were as follows Number of semi-annual payments Amount of each semi-annual payment Effective annual interest rate Date of first payment $2,100 8% 1/1/x1 The note payable described above is referred to as Note Payable "A". The effective interest method of amortization is used for this note. The life of the office furniture is estimated to be (number of years): 16 12% The residual value (as a percentage of original cost) is estimated at: 6) Computers were purchased on February 1, 20x1 for cash: The life of the computers is estimated to be (number of years: $7,560 The residual value (as a percentage of original cost) is estimated at: 5% 7) The Coleman Equipment Company at the time of the acquisition was as follows was purchased on April 1,20x1. The entry made Accounts receivable 80,000 240,000 700,000 81,900 100,000 Heavy duty equipment Patents Goodwill 150,000 1,051,900 Cash [NOTE: All estimated lives begin as of April 1, 20x1.] a) The estimated life (# of years) of the light duty equipment is: The residual value (as a percentage of original cost) is estimated at: 10% The straight-line method of depreciation is used for these assets. b) The estimated life (# of years) of the heavy duty equipment is The residual value (as a percentage of original cost) is estimated at: 12% The double-declining balance method of depreciaton is used for these assets. Additional information regarding items on the 12/31/x1 post-closing trial balance: c) The patent relates to a device developed by the to assist the operator of heavy equipment. The amortization period (starting on 4/1/x1) years. The straight-line method of amortization is used for this patent. accumulated amortization is not used. Coleman Equipment Company 13 A separate account for d) The goodwill value is subject to impairment testing at the end of each fiscal year. No impairment was identified as of December 31, 20x1 8) The bonds payable "A" (maturity date: 10/1/x6, with semi-annual interest payments on 4/1 and 10/1) were issued at a premium on 10/1/x1. The stated interest rate is: Straight-line amortization is used for the bond issue costs and premium. [Hint: The amounts on the post-closing trial balance as of 12/31/x1 have been adjusted for the three months since the bond was issued on 10/1/x1.] 9% Page 6 ACC 6102-Comprehensive project TRANSACTIONSDURNG 20x2 480 shares. Cost: $25 per share 1) 1/4/x2: Acquired: Simon Company stock 4 These shares were acquired for the available-for-sale securities portfolio 2) 2/1/x2: A franchise (to be the sole distributor of the Scott's brand of top soil and fertilizer within a 50 mile radius of Rockland's place of business) was purchased for: The franchise covers a period of 7 years. 50,400 3) 4/1/x2: The company purchased a piece of land for $1,275,000 that contains a marble quarry. It plans to extract marble from the quarry over the next eight years. After the eight years, the company has an obligation to return the site to its original condition. The estimated cost at the end of the eight years is: The appropriate interest rate in this situation is: $ 85,000 8% 101.9 plus accrued interest. Bennett Company bonds are sold at: 4) 5/1/x2: 5) 6/1/x2: The company issued 5-year bonds (maturing on 6/1/x7) with the following features: 750,000 Principal Stated interest rate: Effective interest rate at 6/1/x2: 8% 10% Semi-annual interest payments: June 1 and December 1. These bonds are referred to as Bonds Payable "B". The effective interest method of amortization is used. 6) 7/1/x2: $40,000 of Dale Company bonds were acquired for a total amount of $ 40,640 The stated rate of interest on these bonds is: Annual interest payments are made on March 1. The bonds mature on: These bonds were acquired for the available-for-sale securities portfolio. 12% 3/1/x5 7) 8/1/x2: 15,400 paid by the company for legal services related to a patent infringement case it had brought (and won) against a competitor. 8) 9/1/x2: Mundy Company bonds were acquired for the trading securities portfolio. Face amount of bonds: Cost at date of purchase: Stated interest rate: Semi-annual interest payment dates: Maturity date of bonds: $54,000 $56,000 plus accrued interest 6% 6/30 and 12/31 12/31/x3 TRANSACTIONS DURING 20x2 9) 10/1/x2: Some heavy duty equipment (acquired from the on 4/1/x1 - with an original cost assignment of Coleman Equipment Company $ 140,000) was sold for: 100,800 1 10) 11/1/x2: Rockland completed excavation work for one of its customers. The following payment terms were arranged on 11/1/x2: Quarterly payments Date of first payment: Date of last payment: Effective annual interest rate s 7,600 11/1/x2 8/1/x4 8% This note is referred to as Note Receivable "2. The effective interest method of amortization is used. The revenue is recorded in the company's "Sales" account. 11/11/x2: Shares of Harper Company stock 165 $54 11) are sold Number of shares sold: Sale r share 12) 12/1/x2: Lund Company bonds were acquired for the Held-to-Maturity securities portfolio. Amount purchased Cost at date of purchase Stated interest rate: Semi-annual interest payment dates: Maturity date of bonds: $60,000 62,840 plus acrrued interest 8% 5/1 and 11/1 11/1/x8 Year-end information: 12/31/x2 below 1) Fair market values for each of the securities owned by the company appear Fair value $ 30 /share 35 /share $57 /share s 51 /share 29 /share 102.5% of par 97% of par Fosse Company stock Morse Company stock stock Simon Company stock Mundy Company bonds Loesser Company bonds Dale Company bonds Gershwin Company bonds Lund Company bonds 9896 ofpar 103% of par 2) Future cash flow information and fair market values for intangible assets are as follows: Franchise: Expected future cash flows: Fair value: S23,800 19,800 Expected future cash flows Fair value: 89,725 87,725 Goodwill: The Coleman Equipment Divisionreports the following amounts on its balance sheet dated 12/31/x2: 90,000 775,000 145,000 290,000 Current Assets Non-current Assets Current Liabilities Non-current Liabilities The recorded amount of the net assets (excluding Goodwill for the is the same as fair value except for the following: Coleman Equipment Division The fair value of equipment is 35,000 higher than its carrying value. The fair value of the patent is stated above: 87,725 Hint: The difference between the carrying value and the fair value of the patent as of 12/31/x2 is also part of the determination of the fair value of the net identifiable assets at 12/31/x2.] 5 Coleman Equipment Division, assume the fair value at 12/31/x2 is: 410,000 For the 3) Prepare schedules showing the individual components and final balances for the following: (be sure to clearly present and label all supporting computations): a) Interest Receivable on 12/31/x1. b) Interest Receivable on 12/31/x2. c) The balance sheet presentation of each securities portfolio on 12/31/x1. i. Trading securities portfolio ii. Available-for-sale securities portfolio ii. Held-to-maturity securities portfolio d) The balance sheet presentation of each securities portfolio on 12/31/x2. i. Trading securities portfolio ii. Available-for-sale securities portfolio ii. Held-to-maturity securities portfolio e) Interest Revenue for the year ended 12/31/x1. f) Interest Revenue for the year ended 12/31/x2. g) Interest Expense for the year ended 12/31/x1. h) Interest Expense for the year ended 12/31/x2. i) Depreciation Expense for the year ended 12/31/x2. Note: Include all fixed assets owned by the company, including those acquired on 4/1/x1 from the Coleman Equipment Company Rockland Property Development, Inc. recently completed its first year of operations selected accounts appearing on the post-closing trial balance as of December are presented below Rockland Property Development, Inc. Post-closing Trial Balance December 31, 20x1 Trading Securities Fair Value Adjustment (Tradingl Interest Receivable Notes Receivable "1" Available-for-Sale Securities 80,250 2,284 11,800 32,000 185,930 4,910 122,800 11,449 Held-to-Maturity Securities Office Furniture Accumulated depreciation-office furniture 630 7,560 puters Accumulated depreciation - computers Light duty equipment Accumulated depreciation - light duty equipment 2,195 240,000 18,000 700,000 131,250 Accumulated depreciation - heavy duty equipment Patent Goodwill Bond Issue Costs (Bond Payable "A" Notes payable "A" 77,175 100,000 2,565 8,400 472 Bonds Payable "A" (maturity date: October 1, 20x6) Premium on Bonds Payable "A" 400,000 2,736 6102-Cmp ACC COMPANY ACCOUNTING POLICIES 1) No reversing entries are used. 2) All numbers are rounded to the nearest dollar 3) The straight-line method of depreciation is used for all fixed assets, except where otherwi se stated. 4) Straight-ine amortization is used for all intangible assets and all bond investments; all are calculated to the nearest month. 5) Amortization methods for bonds payable will be indicated separately. 6) When band investments occur between interest payment dates (and accrued interest is paid) the interest receivable account is debited. d issuances occur between interest payment dates (and accrued interest is received) the interest payable account is credited. 7) When bon The company's fiscal year ends on December 31. Adjusting entries are prepared once a year, on 8) December 31. Additional information regarding items on the 12/31/x1 post-closing trial balance: 1) The trading securities portfolio consists of the following securities at 12/31/x1: cost at date of purchase Date of amount purchased 700 shares $ 450 shares purchase nski 7/28/x1 Security !Verdon Company stock 27 /share 33 /share Fosse Company stock 11/1/x1 Bennett Company bonds 44,00046,500 plus accrued interest face value Note: The Bennett Company bonds Interest is paid annually on July 1. mature on 12/31/xd. The stated interest rate is: Fair value information for the trading securities portfolio as of 12/31/x1: Security Fair value Verdon Company stock29 /share Fosse Company stock Bennett Company bonds 101.4% of par $29 /share ] Additional information regarding items on the 12/31/x1 post-closing trial balance: 5) Office furnture was acquired on January 1,20x1. Terms of purchase were as follows Number of semi-annual payments Amount of each semi-annual payment Effective annual interest rate Date of first payment $2,100 8% 1/1/x1 The note payable described above is referred to as Note Payable "A". The effective interest method of amortization is used for this note. The life of the office furniture is estimated to be (number of years): 16 12% The residual value (as a percentage of original cost) is estimated at: 6) Computers were purchased on February 1, 20x1 for cash: The life of the computers is estimated to be (number of years: $7,560 The residual value (as a percentage of original cost) is estimated at: 5% 7) The Coleman Equipment Company at the time of the acquisition was as follows was purchased on April 1,20x1. The entry made Accounts receivable 80,000 240,000 700,000 81,900 100,000 Heavy duty equipment Patents Goodwill 150,000 1,051,900 Cash [NOTE: All estimated lives begin as of April 1, 20x1.] a) The estimated life (# of years) of the light duty equipment is: The residual value (as a percentage of original cost) is estimated at: 10% The straight-line method of depreciation is used for these assets. b) The estimated life (# of years) of the heavy duty equipment is The residual value (as a percentage of original cost) is estimated at: 12% The double-declining balance method of depreciaton is used for these assets. Additional information regarding items on the 12/31/x1 post-closing trial balance: c) The patent relates to a device developed by the to assist the operator of heavy equipment. The amortization period (starting on 4/1/x1) years. The straight-line method of amortization is used for this patent. accumulated amortization is not used. Coleman Equipment Company 13 A separate account for d) The goodwill value is subject to impairment testing at the end of each fiscal year. No impairment was identified as of December 31, 20x1 8) The bonds payable "A" (maturity date: 10/1/x6, with semi-annual interest payments on 4/1 and 10/1) were issued at a premium on 10/1/x1. The stated interest rate is: Straight-line amortization is used for the bond issue costs and premium. [Hint: The amounts on the post-closing trial balance as of 12/31/x1 have been adjusted for the three months since the bond was issued on 10/1/x1.] 9% Page 6 ACC 6102-Comprehensive project TRANSACTIONSDURNG 20x2 480 shares. Cost: $25 per share 1) 1/4/x2: Acquired: Simon Company stock 4 These shares were acquired for the available-for-sale securities portfolio 2) 2/1/x2: A franchise (to be the sole distributor of the Scott's brand of top soil and fertilizer within a 50 mile radius of Rockland's place of business) was purchased for: The franchise covers a period of 7 years. 50,400 3) 4/1/x2: The company purchased a piece of land for $1,275,000 that contains a marble quarry. It plans to extract marble from the quarry over the next eight years. After the eight years, the company has an obligation to return the site to its original condition. The estimated cost at the end of the eight years is: The appropriate interest rate in this situation is: $ 85,000 8% 101.9 plus accrued interest. Bennett Company bonds are sold at: 4) 5/1/x2: 5) 6/1/x2: The company issued 5-year bonds (maturing on 6/1/x7) with the following features: 750,000 Principal Stated interest rate: Effective interest rate at 6/1/x2: 8% 10% Semi-annual interest payments: June 1 and December 1. These bonds are referred to as Bonds Payable "B". The effective interest method of amortization is used. 6) 7/1/x2: $40,000 of Dale Company bonds were acquired for a total amount of $ 40,640 The stated rate of interest on these bonds is: Annual interest payments are made on March 1. The bonds mature on: These bonds were acquired for the available-for-sale securities portfolio. 12% 3/1/x5 7) 8/1/x2: 15,400 paid by the company for legal services related to a patent infringement case it had brought (and won) against a competitor. 8) 9/1/x2: Mundy Company bonds were acquired for the trading securities portfolio. Face amount of bonds: Cost at date of purchase: Stated interest rate: Semi-annual interest payment dates: Maturity date of bonds: $54,000 $56,000 plus accrued interest 6% 6/30 and 12/31 12/31/x3 TRANSACTIONS DURING 20x2 9) 10/1/x2: Some heavy duty equipment (acquired from the on 4/1/x1 - with an original cost assignment of Coleman Equipment Company $ 140,000) was sold for: 100,800 1 10) 11/1/x2: Rockland completed excavation work for one of its customers. The following payment terms were arranged on 11/1/x2: Quarterly payments Date of first payment: Date of last payment: Effective annual interest rate s 7,600 11/1/x2 8/1/x4 8% This note is referred to as Note Receivable "2. The effective interest method of amortization is used. The revenue is recorded in the company's "Sales" account. 11/11/x2: Shares of Harper Company stock 165 $54 11) are sold Number of shares sold: Sale r share 12) 12/1/x2: Lund Company bonds were acquired for the Held-to-Maturity securities portfolio. Amount purchased Cost at date of purchase Stated interest rate: Semi-annual interest payment dates: Maturity date of bonds: $60,000 62,840 plus acrrued interest 8% 5/1 and 11/1 11/1/x8 Year-end information: 12/31/x2 below 1) Fair market values for each of the securities owned by the company appear Fair value $ 30 /share 35 /share $57 /share s 51 /share 29 /share 102.5% of par 97% of par Fosse Company stock Morse Company stock stock Simon Company stock Mundy Company bonds Loesser Company bonds Dale Company bonds Gershwin Company bonds Lund Company bonds 9896 ofpar 103% of par 2) Future cash flow information and fair market values for intangible assets are as follows: Franchise: Expected future cash flows: Fair value: S23,800 19,800 Expected future cash flows Fair value: 89,725 87,725 Goodwill: The Coleman Equipment Divisionreports the following amounts on its balance sheet dated 12/31/x2: 90,000 775,000 145,000 290,000 Current Assets Non-current Assets Current Liabilities Non-current Liabilities The recorded amount of the net assets (excluding Goodwill for the is the same as fair value except for the following: Coleman Equipment Division The fair value of equipment is 35,000 higher than its carrying value. The fair value of the patent is stated above: 87,725 Hint: The difference between the carrying value and the fair value of the patent as of 12/31/x2 is also part of the determination of the fair value of the net identifiable assets at 12/31/x2.] 5 Coleman Equipment Division, assume the fair value at 12/31/x2 is: 410,000 For the 3) Prepare schedules showing the individual components and final balances for the following: (be sure to clearly present and label all supporting computations): a) Interest Receivable on 12/31/x1. b) Interest Receivable on 12/31/x2. c) The balance sheet presentation of each securities portfolio on 12/31/x1. i. Trading securities portfolio ii. Available-for-sale securities portfolio ii. Held-to-maturity securities portfolio d) The balance sheet presentation of each securities portfolio on 12/31/x2. i. Trading securities portfolio ii. Available-for-sale securities portfolio ii. Held-to-maturity securities portfolio e) Interest Revenue for the year ended 12/31/x1. f) Interest Revenue for the year ended 12/31/x2. g) Interest Expense for the year ended 12/31/x1. h) Interest Expense for the year ended 12/31/x2. i) Depreciation Expense for the year ended 12/31/x2. Note: Include all fixed assets owned by the company, including those acquired on 4/1/x1 from the Coleman Equipment Company
