Question

C11-1 Financial Reporting of Depreciation, Write-off, Bond Issuance and Common Stock Issuance, Purchase, Reissuance, and Cash Dividends (Chapters 4, 8, 9, 10, and 11) (LO 4-2, 4-5, 8-2, 9-3, 10-3, 11-2, 11-3] American Laser, Inc., reported the following account balances on January 1. Credit Debit 5,000 $ $ 30,000 90,000 2,000 0 Accounts Receivable Accumulated Depreciation Additional Paid-in Capital Allowance for Doubtful Accounts Bonds Payable Buildings Cash Common Stock, 10,000 shares of $1 par Notes Payable (long-term) Retained Earnings Treasury Stock TOTALS 247,000 10,000 10,000 10,000 120,000 $ 262,000 $262,000 The company entered into the following transactions during the year. Jan. 15 Issued 5,000 shares of $1 par common stock for $50,000 cash. Jan. 31 Collected $3,000 from customers on account. Feb. 15 Reacquired 3,000 shares of $1 par common stock into treasury for $33,000 cash. Mar. 15 Reissued 2,000 shares of treasury stock for $24,000 cash. Aug. 15 Reissued 600 shares of treasury stock for $4,600 cash. Sept. 15 Declared (but did not yet pay) a $1 cash dividend on each outstanding share of common stock. Oct. 1 Issued 100, 10-year, $1,000 bonds, at a quoted bond price of 101. Oct. 3 Wrote off a $2,000 balance due from a customer who went bankrupt. Dec. 29 Recorded $230,000 of service revenue, all of which was collected in cash. Dec. 30 Paid $200,000 cash for this year's wages through December 31. Ignore payroll taxes and payroll deductions. Dec. 31 Calculated $10,000 of depreciation for the year to be recorded. (Ignore accrual adjustments for interest and income taxes.)

Answer 1

American Laser Inc. Journal Enteries Date Particulars Jan-15 Cash a/c Dr. To Common Stock To Additional Paid in Capital (Common Stock issued) Debit in $ Credit in $ 50000 5000 45000 Debit in $ Credit in $ 165600 247000 3000 Jan-31 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 3000 Trial Balance For the period ending Dec 31 Particulars Cash Accounts Receivable Allowance for Doubtful accounts Building Accum. Depre - Build Dividend Payable Note Payable - Long Term Bond Payable Premium on Bond Payable Common Stock Additional Paid in Capital Retained Earnings Treasury Stock Service Revenue Wages Expense Depreciation Expense - Build. Totals 40000 3600 10000 100000 1000 15000 135000 114400 Feb-15 33000 Treasury Stock a/c Dr. To Cash (Treasury stock purchased) 3000x11 33000 Mar-15 Dr. 26400 4600 2000 230000 Cash a/c Retained Earnings a/c Dr. To Treasury Stock (Treasury stock reissued) 600 x 11 = 6600 6600 200000 10000 649000 649000 3600 Sep-15 Retained Earnings a/c Dr. To Dividend Payable (Dividend declared) (10000 - 3000 + 600 ) x 1 3600 230000 Dr. 101000 Oct-01 Cash a/c To Bonds Payable To Premium on Bonds Payable (Bonds issued at premium) Statement of Income For the period ending Dec 31 Service Revenue Less: Wages Expense Depreciation Expense - Build. Net Income 100000 1000 200000 10000 210000 20000 Dr. 2000 Oct-03 Allowance for Doubtful accounts a/c To Accounts Receivable (Uncollectibles written off) 2000 Statement of Retained Earnings For the period ending Dec 31 Beginning Balance Net Income 114400 20000 134400 230000 Dec-29 Cash a/c Dr. To Service Revenue (Service provided for cash) 230000 Dr. 200000 Dec-30 Wages Expense a/c To Cash (Wages Paid) 200000 10000 Dec-31 Depreciation Expense - Build. a/c Dr. To Accum. Depre - Build (Depreciation charged to Equip) 10000

Balance sheet As at Dec 31 Assets Current Assets Cash Amounts in $ Amounts in $ Amounts in $ Amounts in $ Liabilities Current Liabilities 165600 Dividend Payable 3600 Non Current Assets Building Accum. Depre - Build 247000 - 40000 Non Current Liabilities Note Payable - Long Term 207000 Bond Payable Premium on Bond Payable 10000 100000 1000 111000 Shareholders Equity Common Stock Additional Paid in Capital Retained Earnings Treasury Stock 372600 Total Liabilities & Equity 15000 135000 134400 -26400 258000 372600 Total Assets Dec-31 Debt to Assets Ratio = Total Liabilities/Total Assets = 114600 / 372600 = 30.76% Jan-01 Debt to Assets Ratio = Total Liabilities/Total Assets = 10000 / 230000 = 4.35%