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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