Q20E The transactions below took plac... [FREE SOLUTION]

Chapter 23: Q20E (page 1381)

The transactions below took place during the year 2017.
1. Convertible bonds payable with a par value of $300,000 were exchanged for unissued common stock with a par value of $300,000. The market price of both types of securities was par.
2. The net income for the year was $410,000.
3. Depreciation expense for the building was $90,000.
4. Some old office equipment was traded in on the purchase of some dissimilar office equipment, and the following entry was made.
Equipment 50,000
Accum. Depreciation鈥擡quipment 30,000
Equipment 40,000
Cash 34,000
Gain on Disposal of Plant Assets 6,000
The Gain on Disposal of Plant Assets was included in income before income taxes.
5. Dividends in the amount of $123,000 were declared. They are payable in January of next year.
Instructions
Show by journal entries the adjustments that would be made on a worksheet for a statement of cash flows.

Expert verified

The journal entries are recorded in Step 2 that would appear on a worksheet for a statement of cash flows.

The dividends are defined as the part of profits which are distributed among the shareholders of the company. It can be in form of cash or stocks

Journal
Date	Particulars	Debit ($)	Credit ($)
1	Bonds Payable	300,000
	Common stock		300,000
	(Noncash financing activities)

2	Operating 鈥� Net Income	410,000
	Retained Earnings		410,000
	(Net Income recorded)

3	Operating - Depreciation Expense	90,000
	Accumulated Depreciation - Equipment		90,000
	(Depreciation expense recorded)

4	Accumulated Depreciation 鈥� Equipment	30,000
	Equipment	10,000
	Operating 鈥� Gain on disposal of plant assets		6,000
	Investing 鈥� Purchase of equipment		34,000
	(Sale and purchase of equipment recorded)

5	Retained Earnings	123,000
	Dividends payable		123,000
	(Dividends recorded)

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LASKOWSKI CO. INCOME STATEMENT
Revenues	\(6,583,000
Operating expenses (excluding depreciation) \)4,920,000
Depreciation expense 880,000	5,800,000
Income before income tax	783,000
Income tax expense	353,000
Net income	\( 430,000

LASKOWSKI CO. COMPARATIVE BALANCE SHEETS (PARTIAL)
	2017	2016
Cash	\(672,000	\)130,000
Accounts receivable	775,000	610,000
Inventory	834,000	867,000
Accounts payable	521,000	501,000

MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016
	2017	2016
Cash	\(10,000	\)4,000
Accounts receivable	20,500	12,950
Short-term investments	22,000	30,000
Inventory	42,000	35,000
Prepaid rent	3,000	12,000
Prepaid insurance	2,100	900
Supplies	1,000	750
Land	125,000	175,000
Building	350,000	350,000
Accumulated depreciation 鈥� building	(105,000)	(87,500)
Equipment	525,000	400,000
Accumulated depreciation 鈥� equipment	(130,000)	(112,000)
Patents	45,000	50,000
Total assets	\(910,600	\)871,100

Account payable	\(22,000	\)32,000
Income tax payable	5,000	4,000
Salaries and wages payable	5,000	3,000
Short-term note payable	10,000	10,000
Long-term note payable	60,000	70,000
Bond payable	400,000	400,000
Premium on bond payable	20,303	25,853
Common stock	240,000	220,000
Paid-in-capital in excess of par 鈥� common stock	25,000	17,500
Retained earnings	123,297	88,747
Total liabilities and stockholders equity	\(910,600	\)871,100

MICHAELS COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017
Sales revenue		\(1,160,000
Cost of goods sold		748,000
Gross margin		412,000
Operating expenses
Selling expenses	\)79,200
Administrative expenses	156,700
Depreciation/Amortization expenses	40,500
Total operating expenses		276,400
Income from operations		135,600
Other revenue/expenses
Gain on sale of land	8,000
Gain on sale of short-term investment	4,000
Dividend revenue	2,400
Interest expenses	(51,750)	(37,350)
Income before tax		98,250
Income tax expenses		39,400
Net income		58,850
Dividend to common stockholders		(24,300)
To Retained earnings		$34,550