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Financial Accounting problems

At the beginning of 2004, Bellamy Company acquired equipment costing $60,000. It was estimated that this equipment would have a useful life of 6 years and a residual value of $6,000 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year

During 2006 (the third year of the equipment's life), the company's engineers reconsidered their expectations and estimated that the equipment's useful life would probably be 7 years (in total) instead of 6 years. The estimated residual value was not changed at this time. However, during 2009 the estimated residual value was reduced to $3,000.


Indicate how much depreciation expense should be recorded for this equipment each year by completing the following table

Year Depreciation Expense Accumulated Depreciation

(2010 depreciation expense, $8,700)


On January 1, 2006, Galactica Corporation had the following stockholders' equity accounts.

Common Stock ($20 par value, 60,000 shares issued and outstanding) 1,200,000
Paid-in Capital in excess par value 200,000
Retained Earnings 500,000

During the year, the following transactions occurred.

Feb. 1 Declared a $1 cash dividend per share to stockholders of record on February 15, payable March 1.

Mar. 1 Paid the dividend declared in February

Apr. 1 Announced a 5-for-1 stock split. Prior to the split, the market price per share was $35.

Jul. 1 Declared a 5% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the stock was $7 per share.

Jul. 31 Issued the shares for the stock dividend

Dec. 1 Declared a $0.50 per share dividends to stockholders of record on December 15, payable January 5, 2007

31 Determined that net income for the year was $380,000


a.) Journalize the transaction and closing entries
b.) Enter the beginning balances and post the entries to the stockholders' equity accounts. (Note: Open additional stockholders' equity accounts as needed)
c.) Prepare a stockholders' equity section at December 31 (Total Stockholders' equity $2,062,500)


The income statement of Noah's Ark is shown below

Income Statement
For the year ended November 30, 2006

Sales $6,800,000
Cost of Goods Sold
Beginning Inventory $2,000,000
Purchases 4,300,000

Goods available for sales 6,300,000
Ending inventory 1,400,000

Cost of Goods sold 4,900,000

Gross Profit 1,900,000
Operating Expenses
Selling expenses 450,000
Administrative expenses 600,000 1,050,000

Net Income $850,000
Additional Information
1. Accounts receivable decreased $230,000 during the year.
2. Prepaid expenses increased $150,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $200,000 during the year.
4. Accrued expenses payable decreased $100,000 during the year.
5. Administrative expenses include depreciation expense of $90,000

Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2006, for Noah's Ark using the indirect method.
(Net cash provided $1,320,000)

P14-3A (Net Cash provided $1,320,000)

Ana Alicia Company's income statement for the year ended December 31, 2006, contained the following condensed information.

Revenue from fees $900,000
Operating expenses (excluding depreciation) $624,000
Depreciation expense 56,000
Loss on sale of equipment 20,000 700,000

Income before income taxes 200,000
Income tax expense 60,000

Net Income 140,000

Alicia's balance sheet contained the following comparative data at December 31

2006 2005

Accounts receivable $47,000 $57,000
Accounts payable 41,000 36,000
Income taxes payable 4,000 7,000

(Accounts payable pertains to operating expenses)


Prepare the operating activities section of the statement of cash flows using the direct method. (Net cash provided $228,000)


Solution Summary

The solution solves a lot of financial accounting problems (all probelms are stated in the question below). The problems realte to deprecation, journalizing entries, cash flow statement and indirect method