G Service Company’s balance sheets and income statement

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This is an intermediate accounting question,not principle accounting I and II !!!!

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21. (20 points) G Service Company’s 2016 and 2017 balance sheets and 2017 income statement (excluding EPS) follow: 12-31-16 Cash Trade receivables, net Prepaid expenses Plant assets Accumulated depreciation Patents $900,000 600,000 100,000 2,900,000 (600,000) 240,000 $4,140,000 Accrued liabilities Unearned revenues Short-term debt Bonds payable Discount on bonds payable Asset retirement obligations Common stock ($1 par value) Additional paid-in-capital, common stock Treasury stock Retained earnings Sales Cost of services provided Operating expenses Other (gains)/losses, net Impairment loss on plant assets Interest expense Income before taxes Income tax expense Net income 109,953 250,000 150,000 300,000 (2,503) 82,270 50,000 1,450,000 (250,000) 2,000,280 $4,140,000 12-31-17 $1,820,000 760,000 250,000 3,500,000 (725,000) 200,000 $5,805,000 72,000 65,000 100,000 200,000 (6,173) 154,513 53,350 1,623,400 (150,000) 3,692,910 $5,805,000 $6,700,000 2,900,000 1,400,000 (3,458) 47,000 18,958 2,337,500 514,250 $1,823,250 Additional information for G follows:  During 2017, G declared and paid cash dividends.  On 06-30-17, G declared and distributed a 5% stock dividend on its outstanding common stock. At the time of declaration, one share of G’s stock traded for $48.  On 08-15-17, G issued, in exchange for cash, 600 shares of its common stock when G’s stock traded for $50 per share. At the time of the issuance, G incurred and paid $1,200 of stock issuance costs.  G is a publicly-traded company. On 12-01-17, G issued 500 shares of its common stock in exchange for a tract of land (PP&E). At the time of the issuance, the appraised value of the land was $40,000.  On 09-01-16, bought back 5,000 shares of its own common stock. This was G’s first treasury stock transaction. Also, during 2016, this was G’s only treasury stock transaction. On 12-31-17, G reissued 2,000 of its treasury shares at $48 per share.  During 2017, G sold a machine (PP&E) for $16,000. The machine had an original cost of $50,000. At the time of sale, the machine’s book value was $5,000.  During 2017, G spent $150,000 to increase the useful life of one of its fixed assets.  On 12-31-15, G acquired a fixed asset that will require G to spend an estimated $100,000 to dismantle the asset when G retires the asset on 12-31-20. At 12-31-15, the interest rate on US Treasury securities was 2% and G’s credit standing required a 3% risk premium.  On 01-01-17, G acquired a fixed asset that will require G to spend an estimated $80,000 to dismantle the asset when G retires the asset on 12-31-20. At 01-01-17, the interest rate on US Treasury securities was 1.5% and G’s credit standing required a 4% risk premium.  G has several patents, all of which have limited lives. During 2017, G did not enter into any transaction that would increase the balance in its patent account. 1     On 06-30-14, G issued $300,000 of its 5%, 5-year callable term bonds dated 06-30-14. The bonds pay interest every June 30 and December 31. When G issued the bonds, similar bonds paid 4.75%. On 06-30-14, G incurred and paid $8,000 of bond issuance costs. On 12-31-17, after making the semi-annual interest payment, G called in (retired) all the bonds at 102. On 12-31-17, G issued $200,000 of its 2%, 5-year term bonds dated 12-31-17. The bonds pay interest every December 31 and June 30. When G issued the bonds, similar bonds paid 2.5%. On 12-31-17, G incurred and paid $1,500 of bond issuance costs. G’s 2017 operating expenses includes depreciation, patent amortization, and ARO accretion expenses. G uses the indirect method. Prepare a statement of cash flows in good form. Be sure to label your answers as provided by OR used in. Do NOT worry about any supplemental disclosures. extra credit: determine the quarterly dividend per share amount that G paid during 2017. Assume (1) that the quarterly dividend per share amount did not change during the year and (2) that the ex-dividend dates were 03-15, 06-15, 09-15, and 12-15. Be sure to show in detail how you determined the quarterly dividend per share amount. The due date for this is also 03-12-19. 2
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Tags: Operating budget cashflows Financing Activities Investing Activities income statement

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Explanation & Answer

Attached.

STATEMENT OF CASHFLOWS
Cashflows from operating activities
Income before taxation
Adjustment for:
Asset Retirement Obligation
Patent Amortization
Depreciation
Gains from sale of machine
Impairment loss on plant assets
Interest expense
Gains from bonds issue
Increase in prepaid expenses
Decrease in accrued liabilities
Decrease in unearned revenue
Increase in trade receivables
Interest paid
Income taxes paid
Cashflows from Operating Activities
Cashflows from investing activities
Proceeds from sale of machinery
Fixed asset useful life extension expense
Purcase of plant assets
Insurance premium paid
Cashflows from investing activities
Cashflows from financing activities
Proceeds from bonds issue
Bonds issuance cost paid
Proceeds from issue of common stock
Proceeds from issue of treasury stock
Stock issuance expense
Bonds retirement expense
Short-term loan repayment
Dividends paid
Cashflows from financing activities
Net cashflows
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

ASSET RETIREMENT OBLIGATION
DR

CR
1/1/2017 Bal b/d
Cash

82,270.00
72,243.00
154,513.00

12/31/2017 Bal c/f

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