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ACC 122

Fall 2020

Comprehensive Project

BestValue Corporation's Trial Balance at December 31, 20XX is presented below.

All 20XX transactions have been recorded except for the items described on the next page.

Debit. Credit

Cash $109,890

Accounts Receivable 28,789

Inventory 25,540

Debt Investments 0

Land 55,674

Buildings 215,850

Equipment 75,120

Allowance for Doubtful Accounts $1,027

Accumulated Depreciation-Buildings 63,306

Accumulated Depreciation-Equipment 16,048

Accounts Payable 35,278

Interest Payable 0

Unearned Rent Revenue 48,900

Dividends Payable 0

Income Tax Payable 0

Bonds Payable 0

Discount on Bonds Payable 0

Common Stock ($2 par) 29,200

Paid in Capital in Excess of Par-Common Stock 44,580

Preferred Stock ($60 par) 0

Paid in Capital in Excess of Par-Preferred Stock 0

Retained Earnings 107,904

Treasury Stock 0

Cash Dividends. 0

Sales Revenue 776,068

Rent Revenue 0

Gain on Sale of Land 0

Bad Debt Expense 0

Interest Expense 0

Cost of Goods Sold 478,542

Depreciation Expense 0

Other Operating Expenses 53,274

Salaries and Wages Expense. 79,632

Income Tax Expense 0

Total DEBITS $1,122,311 CREDITS $1,122,311

Unrecorded transactions:

Round all calculations if necessary to -0- decimals (to the nearest dollar, do not show cents).

1. On January 1, 20XX, BestValue issued 520 shares of $60 par, 5% preferred stock for $75,810.

2. On January 1, 20XX, BestValue also issued 5,800 shares of common stock for $42,050.

3. On January 1, 20XX, BestValue issued $325,000, 5.5%, 9 year bonds when the market rate was 6%.

Interest is to be paid annually on each January 1, beginning 1 year from date of issue.

4. BestValue reacquired 3,600 shares of its common stock on January 12, 20XX for $8.50 per share.

5. On December 31, 20XX, BestValue declared the annual preferred dividend plus a $2.75 per

share dividend on the outstanding common stock, all payable in cash on January 31 of next year.

is uncollectible at year end is $1,850.

7. The building is being depreciated using the straight line method over 25 years.

The salvage value is $100,000.

8. The equipment is being depreciated using the straight line method over 5 years.

The salvage value is $15,000.

9. Sold the Land for $60,000 cash.

10. Bought Debt Investments worth $200,000 for cash.

11. The unearned rent was collected on December 1, 20XX. It was receipt of 3 months'

rent in advance (December 1, 20XX through February 28 of next year).

12. The first cash interest payment on the 5.5% bonds is due January 1 of next year. The annual

interest on the bonds for 20XX has not yet been recorded. Use the effective interest method.

13. The BestValue Corporation must make an adjusting entry to accrue income tax expense on

Income Before Income Tax at a rate of 36%. The taxes will not be paid until March of next year.

Instructions:

(a) Prepare journal entries for the transactions listed above.

(b) Prepare an updated December 31, 20XX trial balance.

(c) Prepare a multiple-step income statement for the year ending December 31, 20XX.

(d) Prepare a retained earnings statement for the year ending December 31, 20XX.

(e) Prepare a classified balance sheet as of December 31, 20XX.

(f) Prepare a Statement of Cash Flows as of December 31, 20XX.

(g) and (h) Calculate and analyze the following ratios, clearly presenting your work and answers:

1. Working Capital

2. Current Ratio

3. Return on Stockholders' Equity (use ending Common Stockholders' Equity)

4. EPS (all shares are already weighted)

5. Payout Ratio

6. Debt to Assets Ratio

7. Times Interest Earned

8. Free Cash Flow

COMPREHENSIVE PROJECT, cont. 10. BestValue Corporation General Joumal 11. Date Account Titles Debit Credit 1 12. 2. 13 CONTINUED DR CR COMPREHENSIVE PROJECT, cont. COMPREHENSIVE PROJECT, cont. b) (c) BestValue Corporation Updated Trial Balance 12/31/20XX BestValue Corporation Income Statement For the Year Ended December 31, 20XX DR CR Cash Accounts Receivable Inventory Debt Investments Land Buildings Equipment Allowance for Doubtful Accounts Accumulated Depreciation - Buildings Accumulated Depreciation - Equipment Accounts Payable Interest Payable Dividends Payable Uneamed Rent Revenue Income Tax Payable Bonds Payable Discount on Bonds Payable Common Stock ($2 par Paid-in Capital in Excess of Par- Common Stock Preferred Stock ($60 par) Paid-in Capital in Excess of Par. Preferred Stock Retained Eamings Treasury Stock Cash Dividends Sales Revenue Rent Revenue Gain on Sale of Land Bad Debts Expense Interest Expense Cost of Goods Sold Depreciation Expense Other Operating Expenses Salaries and Wages Expense Income Tax Expense Totals (d (d) BestValue Corporation Retained Eamings Statement For the Year Ended December 31, 20XX 7 e) COMPREHENSIVE PROJECT (Continued) BestValue Corporation Balance Sheet 12/31/20XX Assets (f) Statement of Cash Flows: BESTVALUE CORPORATION Comparative Balance Sheets December 31 of the previous year $ Cash Accounts Receivable (net of AFDA) Inventory Land Buildings Equipment Accumulated Depreciation-Buildings Accumulated Depreciation-Equipment Accounts Payable Interest Payable Unearned Rent Revenue Dividends Payable Income Tax Payable 115,982 11,208 15,790 55,674 215,850 75,120 #REF! #REF! 47,598 0 0 #REF! #REFI Liabilities and Stockholders' Equity Instructions: Use the Balance Sheet for December 31, 20XX and the above ending balances for last year's Balance Sheet accounts to prepare the "Net cash provided by operating activities" section of the Cash Flow Statement below using the indirect method. $ BESTVALUE CORPORATION Statement of Cash Flows December 31, 20XX Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Add: Depreciation expense Add: Bad debt expense Less: Gain on sale of land Increase in accounts receivable Increase in inventory Decrease in accounts payable Increase in unearned rent revenue Increase in interest payable Increase in dividends payable Increase in income taxes payable Net cash provided by operating activities 8 9 COMPREHENSIVE PROJECT, cont. 10. BestValue Corporation General Joumal 11. Date Account Titles Debit Credit 1 12. 2. 13 CONTINUED DR CR COMPREHENSIVE PROJECT, cont. COMPREHENSIVE PROJECT, cont. b) (c) BestValue Corporation Updated Trial Balance 12/31/20XX BestValue Corporation Income Statement For the Year Ended December 31, 20XX DR CR Cash Accounts Receivable Inventory Debt Investments Land Buildings Equipment Allowance for Doubtful Accounts Accumulated Depreciation - Buildings Accumulated Depreciation - Equipment Accounts Payable Interest Payable Dividends Payable Uneamed Rent Revenue Income Tax Payable Bonds Payable Discount on Bonds Payable Common Stock ($2 par Paid-in Capital in Excess of Par- Common Stock Preferred Stock ($60 par) Paid-in Capital in Excess of Par. Preferred Stock Retained Eamings Treasury Stock Cash Dividends Sales Revenue Rent Revenue Gain on Sale of Land Bad Debts Expense Interest Expense Cost of Goods Sold Depreciation Expense Other Operating Expenses Salaries and Wages Expense Income Tax Expense Totals (d (d) BestValue Corporation Retained Eamings Statement For the Year Ended December 31, 20XX 7 e) COMPREHENSIVE PROJECT (Continued) BestValue Corporation Balance Sheet 12/31/20XX Assets (f) Statement of Cash Flows: BESTVALUE CORPORATION Comparative Balance Sheets December 31 of the previous year $ Cash Accounts Receivable (net of AFDA) Inventory Land Buildings Equipment Accumulated Depreciation-Buildings Accumulated Depreciation-Equipment Accounts Payable Interest Payable Unearned Rent Revenue Dividends Payable Income Tax Payable 115,982 11,208 15,790 55,674 215,850 75,120 #REF! #REF! 47,598 0 0 #REF! #REFI Liabilities and Stockholders' Equity Instructions: Use the Balance Sheet for December 31, 20XX and the above ending balances for last year's Balance Sheet accounts to prepare the "Net cash provided by operating activities" section of the Cash Flow Statement below using the indirect method. $ BESTVALUE CORPORATION Statement of Cash Flows December 31, 20XX Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Add: Depreciation expense Add: Bad debt expense Less: Gain on sale of land Increase in accounts receivable Increase in inventory Decrease in accounts payable Increase in unearned rent revenue Increase in interest payable Increase in dividends payable Increase in income taxes payable Net cash provided by operating activities 8 9