Razul took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used for large production companies. 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, Razul 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 2021. Below is the balance sheet at the end of 2020 $28,540 21,900 Assets Cash Accounts Receivable Prepaid Insurance Inventory Property, Plant & Equipment Accumulated Depreciation Holister Electric Inc. Balance Sheet As at December 31, 2020 Liabilities Accounts Payable Unearned Revenue Bank Loan Total Liabilities Shareholders' Equity Common Shares - 75,000 issued Retained Earnings Total Shareholder's Equity Liabilities & Owner's Equity $25,400 11,000 28,500 64,900 7,200 74,600 184,000 -30,000 75,000 146 340 221,340 $286,240 Total Assets $286,240 At 2020, Razul has authorized 120,000 common shares and 11,000 preferred shares. The preferred shares will be cumulative and pay $7 dividends. The 75,000 shares issued were issued to Razul. He will maintain control of the company and sit on the board of directors. Transactions during 2021 a) On January 1, Holister purchased a strategic investment of 18,500 shares in Gregor Inc. for $11 per share. This represents 28% of Gregor Inc. common shares. On December 31, Gregor Inc, declares and pays a $80,000 dividend and reports a net income of $340,000. Holister will use the equity method to record this investment. b) On January 1, Razul 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. Holister Electric Inc. issued 30,000 common shares for $75,000 cash and issued 5,000 preferred shares for $20,000 cash. c) On March 1, Holister Electric Inc. issued and sold $250,000, 5 year bonds with an interest rate of 7%. The market rate at the time of issue was 8%. 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 8% for 6 periods are 0.6806 and 3.9927, 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 Gamma Ltd. The company bought 25, $1,600 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 7%, payable annually at March 31. On December 31, 2021, each bond was trading in the market at $1,750. On January 1, 2022, all bonds were sold for $45,000 e) On July 1, Holister purchased a $74,000, 5 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. On November 23, the company purchased 3,000 shares of Daenerys Inc. at $26 per share for the purpose of trading. The shares are less than 7% of the total shares of Daenerys Inc. and are a non-strategic investment, By December 31, the price per share had gone up to $27 per share. g) During 2021, Holister Electric Inc. has performed well, so the board of directors decided to pay dividends. On November 30, 2021, the company declared cash dividends of $80,000, which will be paid out on December 15, 2021. Use the cash dividends method and close cash dividends at the end of the year. 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 If activities Holister Electric Inc Cash Flow Statement For the Year Ended December 31, 2021 Razul took the proceeds from dissolving the partnership and purchased a corporation selling electrical parts used for large production companies. 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, Razul 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 2021. Below is the balance sheet at the end of 2020 $28,540 21,900 Assets Cash Accounts Receivable Prepaid Insurance Inventory Property, Plant & Equipment Accumulated Depreciation Holister Electric Inc. Balance Sheet As at December 31, 2020 Liabilities Accounts Payable Unearned Revenue Bank Loan Total Liabilities Shareholders' Equity Common Shares - 75,000 issued Retained Earnings Total Shareholder's Equity Liabilities & Owner's Equity $25,400 11,000 28,500 64,900 7,200 74,600 184,000 -30,000 75,000 146 340 221,340 $286,240 Total Assets $286,240 At 2020, Razul has authorized 120,000 common shares and 11,000 preferred shares. The preferred shares will be cumulative and pay $7 dividends. The 75,000 shares issued were issued to Razul. He will maintain control of the company and sit on the board of directors. Transactions during 2021 a) On January 1, Holister purchased a strategic investment of 18,500 shares in Gregor Inc. for $11 per share. This represents 28% of Gregor Inc. common shares. On December 31, Gregor Inc, declares and pays a $80,000 dividend and reports a net income of $340,000. Holister will use the equity method to record this investment. b) On January 1, Razul 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. Holister Electric Inc. issued 30,000 common shares for $75,000 cash and issued 5,000 preferred shares for $20,000 cash. c) On March 1, Holister Electric Inc. issued and sold $250,000, 5 year bonds with an interest rate of 7%. The market rate at the time of issue was 8%. 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 8% for 6 periods are 0.6806 and 3.9927, 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 Gamma Ltd. The company bought 25, $1,600 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 7%, payable annually at March 31. On December 31, 2021, each bond was trading in the market at $1,750. On January 1, 2022, all bonds were sold for $45,000 e) On July 1, Holister purchased a $74,000, 5 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. On November 23, the company purchased 3,000 shares of Daenerys Inc. at $26 per share for the purpose of trading. The shares are less than 7% of the total shares of Daenerys Inc. and are a non-strategic investment, By December 31, the price per share had gone up to $27 per share. g) During 2021, Holister Electric Inc. has performed well, so the board of directors decided to pay dividends. On November 30, 2021, the company declared cash dividends of $80,000, which will be paid out on December 15, 2021. Use the cash dividends method and close cash dividends at the end of the year. 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 If activities Holister Electric Inc Cash Flow Statement For the Year Ended December 31, 2021