Towson Corp Was Organized On January 2, 2018

towson Corpwas Organized On January 2 2018 During The First Yea

Analyze financial transactions of Towson Corporation and other entities to prepare financial statements, including calculating paid-in capital in excess of par, dividends to shareholders, treasury stock, stock dividends, unrealized gains/losses on trading securities, allowance for doubtful accounts, uncollectible accounts estimation, inventory valuation using LIFO, depreciation and gain or loss on sale of equipment, payroll taxes, and preparing income statements and balance sheets based on trial balance data.

Paper For Above instruction

The complex financial activities of Towson Corporation and related entities require a thorough analysis to produce accurate financial statements. This analysis involves several components, including stock issuance, dividend payments, treasury stock transactions, stock dividends, securities valuation, receivables estimation, inventory assessment, asset depreciation, asset disposal outcomes, payroll tax calculations, and the preparation of income statements and balance sheets from detailed trial balances.

1. Calculation of Paid-in Capital in Excess of Par for Towson Corp.

In 2018, Towson issued 60,000 shares of $2 par stock at $30 per share, resulting in total proceeds of $1,800,000. The common stock account increases by the par value ($2 x 60,000 = $120,000), and the excess amount ($30 - $2 = $28 per share) contributes to the Paid-in Capital in Excess of Par. This amount is calculated as 60,000 shares x $28 = $1,680,000. Therefore, the balances reported on the year-end balance sheet are $120,000 for Common Stock and $1,680,000 for Paid-in Capital in Excess of Par.

2. Dividends Paid to Common Shareholders in Fiscal Year 2019

Initially, Towson's preferred stock had a total par value of $500,000 (5,000 shares x $100). With a 5% cumulative dividend, the annual preferred dividend obligation was $25,000. In 2018, no dividends were paid, leading to an unpaid dividend of $25,000 carried over to 2019. In 2019, a total of $100,000 was paid in dividends. The preferred stockholders are entitled to their $25,000 dividend in 2019 before any dividends can be paid to common shareholders. After satisfying preferred dividends for 2019 and clearing the carried-over amount, $75,000 remains for common shareholders. Hence, the total dividends paid to common shareholders in 2019 amount to $75,000.

3. Reported Paid-in Capital for Brunswick Corp. Treasury Stock Transactions

Brunswick issued 15,000 shares at $15, resulting in an original common stock and additional paid-in capital. Reacquiring 2,000 shares at $18 reduces the equity, with treasury stock recorded at cost ($18 per share). When 700 shares are reissued at $22, the Treasury Stock account is credited at the cost of $18 per share, and additional paid-in capital from treasury stock transactions is the excess over cost: 700 shares x ($22 - $18) = $2,800. This amount is reported as Paid-in Capital from Treasury Stock on the balance sheet, reflecting the net gain from reissuance over cost.

4. Effect of Stock Dividend on Additional Paid-in Capital

Brunswick declared a 5% stock dividend when the market value was $19 per share. The total number of shares before the dividend is not specified, but the dividend increases common shares outstanding and capital accounts. The total value of stock dividend is computed as 5% of shares outstanding multiplied by market value. The relevant entry credits Additional Paid-in Capital because the dividend exceeds the par value ($10). The dollar amount credited to Additional Paid-in Capital is calculated as (Number of shares issued as dividend) x (Market value - Par value). With the initial common stock balance of $1,000,000 at $10 par, the increase is recorded accordingly, with the excess over par reflected in Additional Paid-in Capital.

5. Unrealized Gain (Loss) on Trading Securities

Easton Company acquired securities with cost basis and recorded their fair market value (FMV) at year-end. The sale of Y Company stock and dividends received influence the realized and unrealized gain/loss. The unrealized gains or losses are calculated based on the difference between the FMV at year-end and the cost basis of the securities held at year-end. Specifically, the unrealized gain/loss for securities is the change in FMV from acquisition to year-end, exclusive of securities sold, which generate realized gains/losses. These calculations indicate a net unrealized loss or gain for the year, which directly affects accumulated other comprehensive income.

6. Allowance for Doubtful Accounts Using Aging Method

The aging method involves applying estimated uncollectible percentages to accounts based on age categories. Summing the estimated uncollectible amounts for each age group yields the required balance in the Allowance for Doubtful Accounts. Adjustments are made considering the existing debit balance of $2,000 to arrive at the ending balance in the allowance account. This process ensures the accounts receivable are presented at net realizable value with proper allowance estimates.

7. Allowance for Uncollectible Accounts Using Percentage of Sales

This method estimates uncollectibles based on credit sales. With total credit sales of $850,000 and an estimate of 1.5%, the uncollectible amount is $12,750. The existing credit balance of $6,000 in the allowance account is adjusted accordingly. The year-end credit to Allowance for Uncollectible Accounts is $12,750, considering prior balances and provision for new uncollectibles.

8. Inventory Valuation Using LIFO Method

Applying LIFO (Last-In, First-Out), the ending inventory comprises the oldest costs remaining after recent purchases and sales. The sale and purchase dates influence the inventory layers. Calculations involve summing the costs of the remaining inventory based on the LIFO assumption, resulting in the ending inventory value. The detailed calculation considers the quantities and unit costs of beginning inventory, purchases, and sold units, leading to the final valuation.

9. Gain or Loss on Sale of Equipment

Adelphi’s equipment was purchased at $60,000 with an estimated residual value of $5,000 and a service life of ten years. Using double declining balance depreciation, accumulated depreciation is calculated, and the book value at sale is determined. The sale proceeds of $30,000 are compared to the book value to compute gain or loss. The calculation reveals whether the sale resulted in a gain or loss, which impacts income statement reporting.

10. Payroll Tax Expense Calculation for Baltimore Company

Barbara’s wages and hours worked are used to compute gross wages, including overtime at 150%. Payroll taxes include Social Security, Medicare, federal and state unemployment taxes. Each component is calculated based on applicable rates, and the total payroll tax expense encompasses employee withholding and employer payroll taxes, providing a comprehensive measure of payroll-related expenses for the period.

11. Preparation of Income Statement and Balance Sheet from Trial Balance

Using Easton Company’s adjusted trial balance, the income statement is prepared by summarizing revenues and expenses to derive net income. The balance sheet presents assets, liabilities, and shareholders’ equity at the fiscal year-end, based on the trial balance data. Proper classification of accounts ensures accurate financial reporting, adhering to accounting standards for presentation clarity and relevance.

Conclusion

The detailed analysis of these diverse financial activities exemplifies the comprehensive nature of accounting procedures. From recording stock transactions to estimating uncollectibles and preparing financial statements, each step requires careful calculation and adherence to accounting principles. Accurate financial reporting enables stakeholders to assess company performance and make informed decisions.

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