Description
This question is about Ch 20/ or Ch17 in Intermedia accounting
Be sure use the knowledge from intermedia accounting
G Service Company’s 2016 and 2017 balance sheets and 2017 income statement follow:
12-31-1612-31-17
Cash $900,000 $980,000
Trade receivables, net430,000450,000
Prepaid expenses100,00050,000
Plant assets1,900,000 3,100,000
Accumulated depreciation(600,000)(730,000)
Investments400,000650,000
Patents170,000200,000
$3,300,000$4,700,000
Accrued liabilities126,940152,199
Short-term debt300,000700,000
Bonds payable500,000450,000
Discount on bonds payable (6,879)(34,376)
Asset retirement obligations119,939162,257
Common stock ($1 par value)30,00034,210
Additional paid-in-capital, common stock 280,000543,940
Retained earnings1,950,0002,691,770
$3,300,000$4,700,000
Sales$5,200,000
Cost of services provided 1,800,000
Operating expenses2,100,000
Other (gains)/losses, net(64,602)
Impairment loss on plant assets 25,000
Interest expense139,602
Income before taxes 1,200,000
Income tax expense250,000
Net income$950,000
Additional information for G follows:
•G is a publicly-traded company. On 06-30-17, G issued 500 shares of its common stock in exchange for a tract of land (PP&E). At the time of the issuance, one share of G’s stock traded for $60. At the time of the issuance, the appraised value of the land was $32,000.
•On 09-15-17, G issued 600 shares of its common stock in exchange for cash. At the time of the issuance, G incurred and paid $1,200 of stock issuance costs.
•On 12-31-17, G declared and distributed a 10% stock dividend. At the time of declaration, one share of G’s stock traded for $65.
•During 2017, G declared and paid cash dividends.
•On 07-01-16, G acquired a fixed asset that will require G to spend an estimated $140,000 to dismantle the asset when G retires the asset on 07-01-21. At 07-01-15, the interest rate on US Treasury securities was 1.50% and G’s credit standing required a 2% risk premium.
•On 12-31-17, G acquired a fixed asset that will require G to spend an estimated $50,000 to dismantle the asset when G retires the asset on 12-31-27. As of 12-31-17, the interest rate on US Treasury securities was 1% and G’s credit standing at that time required a 1.75% risk premium.
•During 2017, G sold a machine (PP&E) for $25,000. The machine had an original cost of $75,000. At the time of sale, the machine’s book value was $20,000.
•During 2017, G spent $10,000 to increase the useful life of one of its fixed assets.
•G has several patents, all of which have limited lives. During 2017:
oG purchased a patent from a competitor.
oG recorded $25,000 of patent amortization.
oG spent $10,000 in legal fees relating to an unsuccessful defense of one of its patents.
•G’s investments consist of the following two investments:
oOwnership of 60% of the stock in Acme Company. G purchased this stock in 2014. During 2017, Acme recorded $100,000 of net income and declared and distributed $20,000 of dividends to its shareholders.
oOwnership of 5% of the stock in Williams Company. G purchased this stock on 12-31-17.
•On 06-30-12, G issued $500,000 of its 6%, 10-year callable term bonds dated 06-30-12. The bonds pay interest every June 30 and December 31. When G issued the bonds, similar bonds paid 6%. On 06-30-12, G incurred and paid $11,000 of bond issuance costs. On 12-31-17, after making the semi-annual interest payment, G called in (retired) one-half of the bonds at 99.
•On 12-31-17, G issued $200,000 of its 3%, 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 3.25%. On 12-31-17, G incurred and paid $2,000 of bond issuance costs.
•G’s 2017 operating expenses includes legal, depreciation, and accretion expenses.
•G’s accrued liabilities account includes any interest payable.
•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.
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