Principles Of Accounting Part A1 After Several Years Of Busi

Principles Ofaccountingpart A1 After Several Years Of Business Abe

Principles of Accounting Part A 1. After several years of business, Abel, Barney, and Cole are liquidating. The following are post-closing account balances: Cash $18,000, Inventory $73,000, Other assets $157,000, Accounts Payable $61,000, Abel, Capital $50,000, Barney, Capital $50,000, Cole, Capital $87,000. Noncash assets are sold for $275,000. Profits and losses are shared equally. After all liabilities are paid, divide the remaining cash amongst the partners. 2. The partnership of Brandon and Ryan is being liquidated. All gains and losses are shared in a 3:1 ratio, respectively. Before liquidation, their balance sheet balances are as follows: Cash $10,000, Other Assets $8,000, Liabilities $4,000, Brandon, Capital $7,000, Ryan, Capital $7,000. a. If the Other Assets are sold for $10,000, how much will each partner receive before paying liabilities and distributing the remaining assets? b. If the Other Assets are sold for $8,000, how much will each partner receive before paying liabilities and distributing remaining assets? Part B 1. Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the future maturity of its bonds. During the first year, the fund earned $3,825. At the time of bond redemption, the fund has a balance of $417,000. Of this, $400,000 was used to redeem the bonds. Journalize the following entries: a. Initial deposit b. The first year’s interest c. The redemption of the bonds 2. On January 1, Auctions Online issued $300,000, 9%, 10-year bonds to lenders at the contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries: a. Issued the bonds b. Paid first semiannual interest payment c. Retired the bonds at maturity Part C 1. Prepare a statement of retained earnings in proper form for White Corporation for the year ended December 31, 2012, from the following: Retained Earnings, January 1, 2012 $2,000, Dividends paid during the year $800, Net income for the year $3,000, Correction of prior year error. Purchase of land recorded as rent expense. 2. Curtis Corporation’s balance sheet included the following: Common Stock, $5 par value, 5,000 shares issued and outstanding $25,000, Retained Earnings $20,000, Total Stockholders’ Equity $45,000. Prepare journal entries for the following transactions: May 3 - Issued 500 shares at $6 per share; May 9 - Reacquired 100 shares at $4 per share; May 15 - Reissued 50 of the Treasury shares at $7 per share; May 17 - Reissued 10 of the Treasury shares at $3 per share.

Paper For Above instruction

Introduction

The principles of accounting play a critical role in ensuring accurate financial reporting and sound decision-making for businesses. This paper addresses several aspects of accounting and partnership liquidation, bond investments, and stockholder equity transactions, illustrating key accounting principles and journal entries involved in each scenario. The analyses provide insight into the process of business liquidation, bond redemption, and stock issuance and repurchase, emphasizing how these processes are recorded and reported in financial statements.

Part A: Partnership Liquidation Analysis

The first scenario involves the liquidation of three partners—Abel, Barney, and Cole—who together possess various assets and liabilities. The initial balances indicate a net worth structured as cash ($18,000), inventory ($73,000), other assets ($157,000), and accounts payable ($61,000). Noncash assets are sold for $275,000, surpassing book values and resulting in gains that must be distributed equally among partners after settling liabilities.

Calculating the distribution of cash after liabilities is essential, with the remaining cash to be divided per partnership agreement. Since profits and losses are shared equally, the surplus from noncash asset sale, after paying liabilities, will be apportioned equally among Abel, Barney, and Cole. The process involves subtracting liabilities from total assets and then dividing the remaining cash, adjusted for profit or loss sharing ratios, to determine individual disbursements.

The second liquidation case involves Brandon and Ryan, sharing gains and losses in a 3:1 ratio. Their balances explicitly specify their capital accounts and liabilities. Sale of 'Other Assets' at different values ($10,000 and $8,000) impacts the amount each partner will receive before liabilities are paid. When assets are sold at $10,000, the gains are recognized, allocated according to their share ratios, and then distributed after covering liabilities. Conversely, at $8,000 sale proceeds, a loss occurs, affecting the distribution accordingly.

Part B: Bond and Investment Transactions

Simon Brothers’ bond sinking fund illustrates systematic saving for bond redemptions. Annually, $47,000 is deposited, earning interest ($3,825), with finite accrued balances ($417,000). Recording the deposits, interest, and bond redemption requires journal entries that reflect correct timing and account balances:

a. The initial deposit records the cash outflow into the sinking fund.

b. Interest earned increases the fund’s balance by recognizing interest income.

c. The bond redemption entry decreases the fund’s balance, reflecting the payout of bonds.

Similarly, Auctions Online’s issuance of bonds at an interest rate of 9% involves recording the bond issue, semiannual interest payments, and eventual bond retirement. The issuance journal entry reflects cash inflow and bond liability recognition, interest payments record periodic obligations, and redemption at maturity cancels the liability and extinguishes the bond.

Part C: Stockholders’ Equity and Retained Earnings

The statement of retained earnings for White Corporation encompasses the accumulated profits, dividends, and adjustments for prior errors. Starting with beginning retained earnings, adding net income, and subtracting dividends yields the closing retained earnings. Notably, correcting prior year errors, such as a land purchase misclassified as rent expense, requires adjustment entries that affect net income and retained earnings diagnostics.

Curtis Corporation’s stock transactions demonstrate equity management—issuing new shares, reacquiring treasury shares, and reissuing treasury shares at different prices. Recording these transactions ensures the equity section accurately reflects the company's capital structure. For example, issuing shares increases common stock and cash; reacquiring shares reduces cash and increases treasury stock; reissuing treasury shares impacts both cash and equity accounts, often at different reissue prices, affecting total stockholders’ equity.

Conclusion

Effective application of accounting principles in partnership liquidation, bond management, and stock transactions ensures transparency and compliance with accounting standards. Proper journal entries support the accurate reflection of financial activities, enabling stakeholders to assess financial health and making informed decisions. The illustrations provided in this paper underscore essential accounting practices fundamental to sound financial management in business.

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