Smith and Jones start a business to build custom bicycles. Smith invests personal funds of $100,000 and Jones invests $70,000. Grandma Smith loans the company $24,000 with the provision it is to be paid back in 12 equal monthly payments plus 1.5% monthly interest on her original contribution. Smith and Jones agreed that ownership would be proportional to their equity investments. In addition, they borrow $40,000 from the bank at interest of 1.5% per month payable monthly. (They do not have to pay back the principal for five years, so ignore it.) They buy $120,000 worth of parts. They use $80,000 of those parts in the first month. They pay factory workers a total of $15,000 for the first month. They pay rent of $4,000 for the month for a factory. They each (not Grandma) draw salaries of $4,000 per month. They sell the resulting bicycles for $150,000. a. Prepare a balance sheet for day zero, that is, store is ready, people hired, parts on hand, money collected from bank, Grandma, Smith, and Jones. b. Prepare an income statement for the first month. c. Prepare a balance sheet for the last day of the first month. d. What is the percent ownership by Smith, Jones, and Grandma on the first day of the month.

Answer:

See answers below.

Explanation:

Question a

The balance sheet for day 0 will have the following balances.

Asset side

Parts $120,000

Cash $114,000

Total assets $234,000

Liabilities and Equity side

Capital $170,000

Short term loan $24,000

Long term loan $40,000

Total liabilities $234,000

Question b

The income statement for the first month will have the following balances.

Revenue (credit) side

Sales $150,000

Expenses (debit) side

Parts used $80,000

wages to factory workers $15,000

rent $4,000

salary $8,000

Interest on grandma's loan $360

Interest on bank loan $600.

Profit for the month $42,040.

Question c

The balance sheet for the last day of the month will have the following balances.

Asset side

Parts $40,000

Cash $234,040

Total assets $274,040

Liabilities and Equity side

Capital $170,000

Profit (added to reserves) $42,040

Short term loan $22,000

Long term loan $40,000

Total liabilities $274,040

Question d

Grandma is not an equity owner since she will be repaid after 1 year.

Therefore, percentage ownership by Smith, Jones and Grandma will be as follows in the ratio of their equity contribution.

Total capital contributed = 100,000 + 70,000 = 170,000

Smith percentage ownership = [tex]\frac{100,000}{170,000}[/tex] = 58.8%

Jones percentage ownership = [tex]\frac{70,000}{170,000}[/tex] = 41.2%

Grandma's ownership = 0% (no equity contribution).

What are the advantages and disadvantages of making small, frequent purchases from just a few suppliers?

On September 15, 2021, Oliver's Mortuary received a $7,200, nine-month note bearing interest at an annual rate of 8% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry will the company record on December 31, 2021

Rust Pipe Co. was established in 1994. Four years later the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. The first represents Class A founders' stock and is entitled to twelve votes per share. The normally traded common stock, designated as Class B, is entitled to one vote per share. In late 2010, Mr. Stone, an investor, was considering purchasing shares in Rust Pipe Co. While he knew the existence of founders’ shares were not often present in other companies, he decided to buy the shares anyway because of a new technology Rust Pipe had developed to improve the flow of liquids through pipes. Of the 1,900,000 total shares currently outstanding, the original founder's family owns 52,725 shares. What is the percentage of the founder's family votes to Class B votes? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

ere are simplified financial statements for Watervan Corporation:



INCOME STATEMENT
(Figures in $ millions)
Net sales $
888.00

Cost of goods sold
748.00

Depreciation
38.00

Earnings before interest and taxes (EBIT) $
102.00

Interest expense
19.00

Income before tax $
83.00

Taxes
17.43

Net income $
65.57



BALANCE SHEET
(Figures in $ millions)
End of Year Start of Year
Assets
Current assets $
376

$
326


Long-term assets
272


229


Total assets $
648

$
555


Liabilities and shareholders’ equity
Current liabilities $
201

$
164


Long-term debt
115


128


Shareholders’ equity
332


263


Total liabilities and shareholders’ equity $
648

$
555




The company’s cost of capital is 8.5%.


a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

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c. Just three days later, Readers’ Corner paid New Books, which settled all amounts owed.
Required:
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2. Prepare the journal entries that Readers’ Corner would record and show any computations. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

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b. What is a black market you have personally seen?

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a. $10,000
b. $10,050
c. $9,950
d. none of the above

is the price of a movie ticket likely to go up or down why?

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6. The definition of land includes (NO/ SOME/ ALL) physical objects that are permanently attached to the property.
7. Examples of physical objects that constitute land for purposes of the statute of frauds include (BUILDINGS/ FENCES/ TREES/ SOIL/ ALL OF THESE)
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10. What type of signature must be on an e-mail in order to enforce an electronic record? (A TYPED NAME/ AN OFFICIAL SIGNATURE/ A NOTARIZED SIGNATURE/ AN ENCRYPTED SIGNATURE)
11. Does the electronic memorandum have the parties' typed names? (YES/ NO)
12. Does the electronic memorandum describe the property involved?(YES/ NO)
13. Is it likely a court would find that the electronic memorandum satisfied the statue of frauds? (YES/ NO)
14. As a result, Hardell (WILL/ WILL NOT) likely be able to enforce the contract against Westbank.

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a. Debit Cash for $10,000 and credit Notes Payable for $10,000.
b. Debit Notes Receivable for $10,700 and credit Cash for $10,700.
c. Debit Notes Receivable for $10,000 and credit Cash for $10,000.
d. Debit Cash for $10,700 and credit Accounts Receivable for $10,700.

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c. Barcelona saves money on training costs.
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most likely cause demand for milk to decline in France?

A. A popular French nutrition author claims that milk is bad for
people's health.
B. French consumers expect the price for milk to increase in the
future.
C. Cheese and other products made from milk become more popular
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D. The French population grows steadily due to years of economic
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Organization costs $24,000
Trademarks 15,000
Discount on bonds payable 35,000
Deposits with advertising agency
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Excess of cost over fair value of net
identifiable assets of acquired subsidiary 75,000
Cost of equipment acquired for research
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Question 3

A situation where the level of output scale and average costs are all rising is called

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