The information below relates to activities of Pops, Inc. in 2019. Pops starts with the following initial partners: William, Lexi, and Megan. Pops develops, manufactures and sells pharmaceuticals. Below are the transactions for the year-ended 12/31/19. Please prepare the necessary journal entries and adjusting journal entries for the following transactions assuming all amounts are paid in cash, unless otherwise stated. After all entries have been recorded, please draft a classified balance sheet and a multi-step income statement for the year-ended 12/31/19. January 1 January 1 February 1 February 10 February 20 March 1 The corporation is formed in the State of Kentucky, with 1,000,000 shares authorized (par value = $1/share). Filing and legal fees = $70,000. On this date, William contributes equipment with a net book value of $400,000 and fair market value of $800,000. Lexi contributes land with a manufacturing facility that has a net book value of $2,000,000 and a fair market value of $ 2,400,000 ($400,000 land, $2,000,000 building). Pops plans to use the building. Megan contributes $ 1,800,000 in cash. William is issued 40,000 shares, Lexi is issued 120,000 shares and Megan is issued 90,000 shares. The fair of the stock is determined to be $20 per share on this date and all transactions have commercial substance. Pops hires a scientist, Leon, to lead the development of a new pharmaceutical, Pillex. to cure the Coronavirus (COVID-19). Upon her hire, Pops grants 50,000 stock options to her that have a strike price of $20/ share, a term of 5 years. They will fully vest on 12/31/19. On the grant day, shares of Pops are valued at $20/share, have an implied volatility of 180%, and the risk-free rate is 1.2%. As an investment, Pops purchases 5-year, 10% bonds of Ordeal Company (dated 01/01/19). They pay fair value (yield to maturity = 12%) plus accrued interest. The bonds have a face value of $500,000. The bonds pay interest semi-annually on June 30 and December 31. Pops's intent is to hold them for more than 1 year, but not to maturity. To begin development of Pillex, Pops purchases $550,000 of equipment. Of this amount, $100,000 can be used on future research projects and the remainder will only be used to develop Pillex. This equipment has a salvage value of $10,000. All equipment is put into use immediately and depreciation for the year is recorded at year-end (12/31). Orgin. Inc. is a supplier of a key ingredient in Pillex. Given their unique business relationship, Pops decides to purchase 9,000 shares of Orgin, Inc. at $35 / share. This makes Pops a 40% owner of Orgin. Inc. On the same date, Pops signs a forward contract with Orgin. Inc. to buy 5,000 lbs. of the key ingredient for $100.25/1b. It will be delivered to Pops on June 25, 2019. Pops will pay the full price on delivery. Pops starts a construction project to build a production facility. On this date they pay $450,000 for architectural renderings and make the first payment to Hegar Construction in the amount of $1,200,000. Additionally, on this day, they take out a $4,000,000 construction loan (6% annual rate over 10 years, with annual payments starting on 12/31/19) from First Federal Bank. The entire loan proceeds are deposited into Pops's checking account. The construction is expected to take 7 months. Don't forget to record the receipt of ALL loan proceeds on this day. March 15 March 15 March 25 April 1 April 22 May 1 June 25 June 30 July 1 August 1 August 15 October 1 October 31 November 15 Development and testing of Pillex begins. Employment contracts for new staff are paid in the amount of $ 360,000 ($100,000 for administrative staff and $260,000 for research staff). Additional research materials were purchased for $150,000 and utilities on the facilities were paid in the amount of $60,000 ($10,000 for admin and $50,000 for research facilities). Pops takes out a long-term note payable (for operational purposes) of $10,000,000 from U.S. Bank. The loan has a stated rate of 9% and term of 10 years. Annual payments are due on January 1, starting on 01/01/20. They received the full loan proceeds in cash on March 15th. The price of the key ingredient (on order from Orgin) falls to $93.50 per 16. on the open market. The drop in price is considered other than temporary. Pops pays $ 1,400,000 to Hegar Construction for the production facility. Pops purchases a pharmaceutical patent from a competitor for $ 7,500,000. The patent will expire on 12/31/2026. Pops amortizes all patents using the straight- line method. They plan to use the patent until its legal life expires. All amortization adjustments are made annually (at 12/31). It has a salvage value= $0. Pops purchases 5-year, $ 500,000 par value Cerber Company bonds. The bonds pay interest annually at 6% each December 31 and are dated January 1, 2018. Pops purchased the bonds at a yield of 5%, plus accrued interest. They intend to hold the bonds until they mature. Orgin delivered 5,000 lbs of the key ingredient as promised. Pops pays for all of it in cash. Pops receives interest from the Ordeal bonds. Pops pays $850,000 to Hegar Construction for the production facility. Pops completes testing of Pillex and determines it is financially viable. They start the process of filing for a patent and incur legal costs of $180,000. Pops purchases 15,000 shares of Doran, Inc. common stock, with the intent to sell within a year, for $42 per share. The broker's commission on the purchase amounted to $2,000. Construction of the new production facility is completed and Pops obtains a Certificate of Occupancy. Pops pays the remaining $100,000 to Hegar Construction. The building is placed into service on this date and will be depreciated over 25 years, using the straight-line method and no salvage value. Pops sells 2,000 shares of Doran, Inc. common stock for $52 per share. The patent for Pillex is approved by the FDA. Production will start in 2020. December 31 Pops receives interest from the Ordeal and Cerber bonds and dividends from Orgin. Inc. of $2.25/share. December 31 Pops makes their first annual payment to First Federal Bank. Please use the following information to make adjusting journal entries at 12/31/19 A. Please make appropriate entries for stock options, interest capitalization, interest receivable, and current portion on loans. B. Please make appropriate entries for depreciation and amortization of fixed assets. Compute to the nearest full month. Pops depreciates all equipment over 7 years using the straight-line method and all buildings over 25 years using the straight-line method. All buildings and patents are estimated to have no salvage value. C. Orgin, Inc. reports $510,000 in total net income for 2019. D. The coronavirus is wreaking havoc on the financial markets. The market prices of securities at December 31, 2019 were as follows (Pops records mark-to-market adjustments once a year, at year-end). All dips in market prices are expected to be temporary and should rebound once people return to sanity and remember that COVID-19 is not the Black Plague. Doran, Inc. Orgin, Inc. Ordeal Company Cerber Company = $27 per share $25 per share $ 410,000 $ 490,000