Designs unmanned aerial vehicles for specific customer

Assignment Help Accounting Basics
Reference no: EM131426643

Asset Project

Attached is the trial balance for McCurry Corporation. McCurry is a small business that custom designs unmanned aerial vehicles for specific customer needs. The business has a part-time bookkeeper with only basic training and experience in accounting. The bookkeeper is, however, knowledgeable enough to know when a transaction is "over his head."  When this happens, he simply writes down the details of the transaction on a piece of paper and puts them in a box to hand to the company's outside accounting firm at the end of the year when financial statements are prepared. 

This year, you have received the box.  Your task is to record the entries required by the ten pieces of paper in the box (which are summarized below). For each of the ten items, you need to record all of the journal entries required for the year including any depreciation or amortization entries.  After recording the transactions, you need to prepare an income statement, statement of retained earnings and balance sheet for the company.

In your conversations with the owner of McCurry, you discover that company can borrow money from its bank at 9% interest.  You may want to consult your textbook for the legal life of any intangibles.  McCurry uses the effective interest method to amortize any discounts or premiums on investments.  The company uses straight-line amortization for intangibles and straight-line depreciation for plant assets.  The company policy is to take a full year's depreciation or amortization in the year of acquisition for any intangible or plant asset.

You may assume all of the balances on the trial balance are correct as a starting point.  You only need to add to the trial balance the results of the transactions you are recording.  Assume all transactions and all amounts are material.  If you don't know the exact date of a transaction, it is fine to record the transaction on the last day of the month in which it occurred.

When recording transactions related to investments, use the balance sheet accounts below to keep the categories of investments separate. You do not need to separate out the income statement accounts (such as interest revenue, dividend revenue, gains or losses).

  • Equity Investments (using Equity Method)
  • Equity Investments (at Fair Value)
  • Fair Value Adjustment - Equity*Hint: also consider if the investment is
  • Debt Investments (at Fair Value) current or long-term
  • Fair Value Adjustments - Debt
  • Debt Investments (at Amortized Cost)

You need to submit the following for this project.

1. Journal entries organized by item, not chronologically.  Have all the entries for #1 together, then #2, etc. Do not organize by date.  Have any required depreciation or amortization with appropriate item. Do not show all the depreciation & amortization at the end.  Show all supporting calculations with the appropriate entry, including any amortization tables.  The easier I can following your work, the more points you will get! Round all entries to the nearest whole dollar.

2. A updated trial balance resulting from your entries.

3. A 2016 year-end multiple-step Income Statement (without earnings per share data), Statement of Retained Earnings and classified Balance Sheet in good form. Round all amounts to the nearest whole dollar.

Here are the items in the box!

1. On January 1, 2016, McCurry had the following 2 equity investments:

 

Number of Shares owned

Cost per Share when purchased

Market value per share on 12/31/2015

DVT Corporation

200

$17

$23

AmTech Industries

75

$42

$65

McCurry owns 2% of the outstanding stock of AmTech and 23% of the outstanding stock of DVT Corporation.  The remaining 77% of DVT stock is held primarily by heirs of the company's founder, who closely control the operations of the company and prevail in all shareholder matters.  The following information is available about the performance of these 2 investments during 2016.

 

Dividends paid

2016 Net Income

Market value per share on 12/31/2016

DVT Corporation

none

$1,260,000

$14

AmTech Industries

$1.25 per share

$15,900,000

$78

The AmTech dividend was paid on 7/15/2016.  McCurry anticipates they will sell the AmTech stock by the end of 2017 to cash in on the substantial gain.  The DVT stock will be held on the hopes that the price will rebound over the long term. 

2. On January 1, 2016, McCurry purchased $3,000 in bonds issued by Kane Company for $3,736.The contract rate on the bonds is 7% with interest payable on July 1 and January 1.  The bonds mature on January 1, 2026 and they were priced to yield 4%.  While management has no specific plans to sell the bonds, it is not likely that they would be held for the almost 10years until maturity.  On December 31, 2016, these bonds were selling at 120.

3. On January 1, 2016, McCurry entered into a 4 year lease for a forklift.  The forklift has an economic life of 6 years and a fair value of $70,000.  The annual lease payment (first payment due 1/1/2016) is $16,000.  McCurry can buy the forklift at the end of the 4 years for $8,000 even though the estimated residual value at that time is estimated to be $15,000.  The implicit rate on the lease, which happened to be listed in the lease contract, is 8%.

4. On January 1, 2016, McCurry also entered in to a 4 year lease of a small warehouse.  The lease requires payments of $36,000 per year to be paid annually beginning on 1/1/2016.   The warehouse probably has a useful life of 20 years or more, so McCurry could try to renegotiate a new lease at the end of the lease term if the space is still adequate, but they are under no obligation to do so and the lessor has made no promises regarding a new lease.  McCurry wanted to lease the space because the purchase of a similar warehouse would probably cost $120,000.  McCurry paid a $3,000 commission to the agent who found the warehouse and negotiated the initial lease.

5. On February 3, 2016, McCurry paid $2,000 to a marketing design firm to prepare a new logo to trademark for a new business segment.  McCurry wants to enter the market of developing drones for serious hobbyists wanting to enter competitive flying.   It is hard to predict the life of this business venture since it is such a new concept, but at this time McCurry plans on being in the business indefinitely.  The legal fees and other costs paid in February to register the trademark totaled $3,000.  In July of 2016, a competitor filed a law suit stating that McCurry's trademark design was too close to their own and would confuse customers.  The suit asked for McCurry's trademark to disallowed.  After McCurry spent $8,000 in legal fees, the competitor dropped the law suit in September.

6. On March 28, 2016, McCurry purchased 400 shares of James Incorporated common stock for $60 per share plus $150 in commissions. James has 2,500 shares of stock issued and outstanding.  At the time, McCurry planned to sell the investment by the end of the year.  On August 14, 2016, Mc Curry received 40 additional shares of James Inc. from a stock dividend when the market price of the stock was $62.  On September 29, 2016, McCurry sold 100 shares of the James stock at $70 per share less commissions of $50.  At the end of 2016, management now intends to hold on to the remaining shares of James for probably two or three more years.  However, it could be sold sooner if there is a need for cash.  James' income for 2016 was $720,000 and the stock's market price on 12/31/16 was $68 per share.

7. On July 1, 2016, the company purchased five $1,000 bonds issued by the City of Centerville School District.  These bonds were purchased for $4,573.  The contract rate on these bonds is 4% with interest payable on 1/1 and 7/1; these bonds mature 7/1/2021.  The bonds were sold to yield 6%.  It is the intention of management to hold these bonds until they mature.   On December 31, 2016, these bonds had a fair value of 94. 

8. On August 18, 2016, McCurry replaced the HVAC (Heating, Ventilation & Air Conditioning) system in its office building.  The office building was purchased in 2011 and was being depreciated over a 30 year life.  The new HVAC system cost $25,000.  The new system will not extend the life of the building, but it is much more efficient than the old system.  In addition, the installation included new venting that will make the building's temperature much more consistent from room to room and increase employee comfort.  No depreciation has been recorded on the building or the new HVAC system for 2016.

9. On September 28, 2016, McCurry purchased 1,600 shares of Gem City Electronics.  Gem City operates five retail stores in the greater Dayton area.  These stores would have great potential in opening up McCurry's products to a new market.  Gem City stock is readily marketable, but McCurry does not plan on selling the stock any time soon.  At the time of the purchase, Gem City had issued and outstanding 6,400 shares of voting common stock.  McCurry paid 25.25 per share for the stock.  Total commissions on the purchase were $200.  During 2016, Gem City's net income was $180,000 and the company paid dividends of $0.50 per share.  Gem City's stock was selling for $27 per share at the end of 2016. 

10. On November 5, 2016, McCurry purchased equipment by issuing a 2 year, non-interesting bear note for $30,000.  The equipment has a useful life of 7 years with no salvage value.  The list value of the equipment was $62,000.

McCurry Corporation

Preliminary Trial Balance

December 31, 2016

 

 

 

 

Debit

Credit

Cash

 $197,225

 

Accounts Receivable

168,000

 

Allowance for Doubtful Accounts

 

2,300

Inventories

192,000

 

Prepaid Insurance

9,000

 

Equity Investments (using Equity Method)

 

 

Equity Investments (at Fair Value)

 6,550

 

Fair Value Adjustment-Equity

       2,925

 

Debt Investment (at Fair Value)

 

 

Fair Value Adjustment-Debt

 

 

Debt Investment (at Amortized Cost)

 

 

Land

  90,000

 

Office Building

420,000

 

Accumulated Depreciation - Office Bldg

 

70,000

Equipment

635,000

 

Accumulated Depreciation - Equip

 

60,000

Accounts Payable

 

75,000

Interest Payable

 

130,000

Short-Term Notes Payable

 

20,000

Long-Term Bank Loans

 

260,000

Common Stock

 

300,000

Retained earnings

 

179,000

Sales Revenue

 

1,590,000

Sales Returns

   3,600

 

Cost of Goods Sold

460,000

 

Selling Expenses

140,000

 

Administrative Expenses

200,000

 

Depreciation Expense

20,000

 

Interest Expense

14,000

 

Income Tax Expense

128,000

 

 

 $2,636,300

 $2,636,300

Reference no: EM131426643

Questions Cloud

What are the three most important elements of personal : In what types of agencies, organizations, or corporations (if applicable) would the position exist?What is the position title?What types of salaries and benefits are available to a person holding the position?What are the essential functions of this ..
Describe how the launch was executed : Can you find a new product or service that was relatively recently released and describe how the launch was executed? Does it match our readings? Does it differ in any way?
Price of product to maximize profit is nonlinear problem : Setting the price of a product to maximize profit is a nonlinear problem that could be assigned to a management scientist. Demand D for a product is generally a decreasing function of price P. When the price is low demand is high but the profit is sm..
Can a slowdoen in the company growth be avoided : Panera bread company in 2014: Can a slowdoen in the company's growth be avoided? 1. What are the company's vision/mission and objectives?
Designs unmanned aerial vehicles for specific customer : Attached is the trial balance for McCurry Corporation. McCurry is a small business that custom designs unmanned aerial vehicles for specific customer needs. The business has a part-time bookkeeper with only basic training and experience in account..
Discuss which generic business-level strategy : Debate: Agree or Disagree: Discuss which generic business-level strategy is best suited to keep the company you selected competitive. Offer supporting rationale for your explanation. Subway is a growing fast food restaurant, with locations all over t..
Twelve patients from a disaster event in your community : Suppose you work in a hospital that just received twelve patients from a disaster event in your community. Your hospital is able to treat and provide necessary surgical services to those that require surgery. Examine the kind of consent that the team..
Company vision-mission and objectives : 1. What are the company's vision/mission and objectives? 2. Corporate strategy and business (or competitive) strategy What have been the key elements of the company's corporate strategy up until the time of the case? What is the company's business..
What is the turnover rate in units for that month : The monthly forecast for June is 12,000 pairs of socks. Historically, the LA DC has demand for 25%, Memphis 30% and Dayton 35%. The remaining 10% is shipped to clients directly from the warehouse. c. assuming the organization as a whole sold 10,000 p..

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  At the end of the year 5000 of supplies remained on hand

at the end of the year 5000 of supplies remained on hand. record the adjustment necessary at december 31 2005. how

  Analyze the advantages and disadvantages of each method

Analyze the advantages and disadvantages of each method. Provide support for your response.

  Production and cash-outlay computations rpr inc anticipates

production and cash-outlay computations rpr inc. anticipates that 120000 units of product k will be sold during may.

  Age the balance and specify any items

(Bad Debts-Aging) Danica Patrick, Inc. includes the following account among its trade receivables.

  Whisker clean company spent 8000 to produce product 89

whisker clean company spent 8000 to produce product 89 which can be sold as is for 10000 or processed further incurring

  The information regarding mahen inc is available sales

the information regarding mahen inc. is available sales 1500000 cost of goods sold 900000 operating expenses 450000

  Describe some of the specific tactics

Resistance to change is more likely to succeed if the forces resisting the change are stronger than the forces driving the need for change. Describe some of the specific tactics that resisters would employ to thwart change efforts.

  Explain average accumulated expenditures

What assets qualify for interest capitalization? What assets do not qualify for interest capitalization?

  Fifo and lifo methods

Prepare a partial income statement through gross profit under the average, FIFO and LIFO methods. Round average cost per unit to four decimal places and all other amounts to the nearest whole dollar.

  What is the amount of variance that is attributed to the

what is the amount of variance that is attributed to the difference between the budgeted and actual wage rate per

  Direct materials and direct labor costs

In what way does the accounting treatment of factory overhead differ from that of direct materials and direct labor costs?

  Why are the revenues and expenditures of governmental

Why are the revenues and expenditures of governmental type funds independent of each other?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd