See attached files for instructions and the worksheets to use to supply the answers
Part A Canton Company experienced the following accounting events during 2018: 1. Canton Company borrowed $10,000 cash from the National Bank on September 1, 2018. 1. Canton invested the borrowed money in land. 1. Canton leased the land and earned rent revenue of $600 cash. 1. As of December 31, 2018, accrued interest (interest expense) on Canton’s bank loan was $400. Required 1. Record the events under an accounting equation. 1. Prepare an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flows for 2018. Part B Canton Company experienced the following accounting events during 2019: 1. Canton earned rent revenue of $1,350 cash in 2019. 1. Canton sold its land for $10,000 cash. 1. Canton accrued interest of $800 on the bank loan. 1. Canton paid cash for the interest due on the bank loan. 1. Canton repaid the $10,000 bank loan (See Event 1 in Part A above) with cash. Required 1. Record the events under an accounting equation. 1. Prepare an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flows for 2019. Use WORK PAPERS FOR PROBLEM SOLUTIONS (see below) Work Paper, Parts A & B, Accounting Equation Assets = Liab. + Equity 2018 Part A Cash + Land = Notes Payable + Int. Pay. + Com. Stock + Ret. Ear. Beginning Balances $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- 1. Effect of Borrowing 2. Purch. of Land 3. Earned Revenue 4. Accrued Int. Exp. End. / Beg. Balances $ 600 + $10,000 = $10,000 + $ 400 + $ -0- + $ 200 2019 Part B 1. Earned Revenue 2. Sold Land 3. Accrued Int. Exp. 4. Paid Interest 5. Repaid Loan −−−−− −−−− −−−− −−−− −−−−− −−−−− Ending Balances $ 750 + $ -0- = $ -0- + $ -0- + $ -0- + $ 750 ═══ ════ ════ ════ ═════ ═════ Work Paper, Parts A & B, Financial Statements Canton Company Income Statements For the Years Ended December 31, 2018 2019 Rent Revenue Interest Expense Net Income Statements of Retained Earnings Beginning Retained Earnings Net Income Dividends Ending Retained Earnings $200 $750 Balance Sheets at December 31 Assets Cash Land Total Assets $10,600 $750 Liabilities Interest Payable Note Payable Equity Retained Earnings Total Liabilities and Equity $10,600 $750 Statements of Cash Flows Cash Flows from Operating Activities Inflow from Rent Revenue Outflow for Interest Expense Net Inflow from Operating Activities Cash Flow from Investing Activities Inflow from Sale of Land Outflow for Purchase of Land Net Inflow (Outflow) from Investing Act. Cash Flows from Financing Activities Inflow from Issue of Note Outflow for Repayment of Note Net Inflow (Outflow) from Financing Act. Net Change in Cash Beginning Cash Balance Ending Cash Balance $ 600 $ 750 CHAPTER 10 Homework Names: Classify each of the following costs for Midas Company as a selling or general and administrative period cost or as a direct or indirect product cost by entering the dollar amount(s) in the appropriate column(s): A. Paid $65,000 in wages for employees who assemble the company's products. B. Paid sales commissions of $53,000. C. Paid $40,000 in salaries for factory supervisors. D. Paid $78,000 in salaries for executives (president and vice presidents). E. Recorded depreciation cost of $18,000. $9,000 was depreciation on factory equipment and $9,000 was depreciation on the company headquarters building. F. Paid $7,000 for various supplies that it used in the factory (oil and materials used in machine maintenance). G. Used $16,000 in prepaid corporate liability insurance. The Alpha Company produces tablet computers. The following information is provided: Classify each of the company's costs as a period cost (general, selling, and administrative cost) or as a direct or indirect product cost. Enter the dollar amount of the cost in the appropriate column. After entering all amounts, calculate the total general, selling, and administrative cost, the total direct product cost, and the total indirect product cost. On January 1, 2015, Unicorn Company paid cash to purchase an automobile. The car dealer gave Unicorn a $2,000 cash discount off the $31,000 list price. However, Unicorn paid an additional $6,000 to equip the car with a more luxurious interior and high tech lighting so it would have greater appeal. Unicorn Company expected the car to have a five-year useful life and a $5,000 salvage value. Unicorn also expected to use the car for 150,000 miles before disposing of it. Unicorn used the car, and it was driven 50,000 / 10,000 / 40,000 / 30,000 / 20,000 miles during each use year respectively. Unicorn sold the car on January 1, 2020, for $7,500 cash. (SHOW ALL CALUCUALTIONS) 1. What is the cost of the car that Unicorn Company will record? (31,000 + $6,000) - $2,000=$35,000 2. Under the straight line method of depreciation, how much depreciation expense will Unicorn have each year of the car’s use? (Asset Cost – Salvage Value). Divided by Useful Life ($35,000 – 5,000) / 5 = $6,000 depreciation expense for each year 3. Under the double declining balance method of depreciation a. What is the percentage depreciation Unicorn will use? (1 year divided by 5 years) = 0.2 or 20% X 2= 40% b. At the end of the first year, how much depreciation expense will Unicorn have for the car? First year (35,000 – 0 ) X 40% = $14,000 c. At the end of the first year, what will be the book value the car? 35,000 – 14,000 = 21,000 d. At the end of the second year, how much depreciation expense will Unicorn have for the car? Year 2 - (35,000 – 14,000). X 40% = $8,400 e. At the end of the second year, what will be the book value the car? 35,000 - (14,000 + 8,400) = $12,600 4. Under the units of production method of depreciation a. How much depreciation will Unicorn have for each mile driven of the car? (35,000 – 5,000) /. 150,000 = 0.20 or 20 cents per mile b. How much depreciation expense will Unicorn have in the last three years under this method? Year 1 – 0.20 X 50,000 = $10,000. Year 3 0.2 X 40,000= $8,000 Year 2 0.20 X 10,000= $2,000 Year 4 0.2. X 30,000= $6,000. Total dep exp $18,000 Year 5 0.2 X 20,000 = $4,000 5. When Unicorn sold the car, what did it recognize as a gain or loss and for how much? Show calculation in proper format and put into the accounting equation. Cost of the Asset - $35,000 Less Accum dep - ($30,000) Book Value $5,000 Cash Proceeds $7,500 GAIN - $2,500 Asset =. Claims Cash. + Book Value of Car =. R.E 7,500