Problem 1

Journal Entry: Dr Cr
1. Cash 1,500,000
Ordinary Share Capital 1,125,000
Ordinary Share Premium 375,000
2. PPE 2,475,000
Accounts Payable 2,475,000
3. Cash 1,105,000
Accounts Receivable 5,145,000
Sales 6,250,000
4. Cash 175,000
Unearned Revenue 175,000
5. Accounts Payable 3,325,000
Cash 3,325,000
6. Cash 5,100,000
Accounts Receivable 5,100,000
7. Supplies 30,000
Cash 30,000
8. Prepaid Advertising 42,500
Cash 42,500
9. Salaries Expense 2,250,000
Cash 2,250,000
10. Utilities Expense 32,500
Cash 32,500
11. Retained Earnings 375,000
Cash 375,000
Adjustment:

1. Salaries Expense 37,500

Salaries Payable 37,500
2. Supplies Expense 50,000
Supplies 50,000
3. Rent Expense 600,0000
Prepaid Rent 600,0000
4. Advertising Expense 32,500
Prepaid Advertising 32,500
5. Utilities Expense 7,500
Utilities Payable 7,500

Cash 2,700,000
Accounts Receivable 895,000
Prepaid Advertising 10,000
Property, Plant and Equipment 3,915,000
Supplies 40,000
Prepaid Building Rental 600,000
Accounts Payable 50,000
Unearned Revenue 175,000
Salaries Payable 37,500
Utilities Payable 7,500
Sales 6,250,000
Advertising Exp 32,500
Rent Expense 600,000
Salaries Expense 2,287,500
Utilities Expense 40,000
 Supplies Expense 50,000
Ordinary Share Capital (3,600 shares outstanding) 3,825,000
Premium 375,000
Retained Earnings 450,000
11,170,000 11,170,000

HEAVEN SPORTS CORPORATION

Statement of Profit or Loss
for the Year Ended December 31, 2020

Sales revenue 6,250,000

Operating expenses:
Advertising Exp (32,500)
Rent Expense (600,000)
Salaries Expense (2,287,500)
Utilities Expense (40,000)
Supplies Expense (50,000)
Total operating expenses (3,010,000
Operating profit 3,240,000
Income tax expense (972,000)
Net Income 2,268,000

HEAVEN SPORTS CORPORATION

Statement of Changes in Equity
for the Year Ended December 31, 2020

Shared Capital Paid-In Capital in Retained Total

Excess of Par Earnings

Capital Beginning, January 1 2,700,000 825,000 3,525,000

Issued Share Capital 1,125,00 375,000 1,500,000
Distribution of Cash Dividend (375,000) (375,000)
Net Income 2,268,000 2,268,000
Capital Ending, December 31 3,825,000 375,000 2,718,000 6,918,000

HEAVEN SPORTS CORPORATION

Statement of Financial Position
as of December 31, 2020
Assets
Current assets:
Cash 2,700,000
Accounts Receivable 895,000
Prepaid Advertising 10,000
Prepaid Building Rental 600,000
Supplies 40,000
Total current assets 4,245,000
Noncurrent Assets:
Property, plant, and equipment 3,915,000
 Total Noncurrent assets 3,915,000
Total assets 8,160,000
Current liabilities:
Accounts Payable 50,000
Unearned Revenue 175,000
Salaries Payable 37,500
Utilities Payable 7,500
Income Tax Payable 972,000
Total liabilities 1,242,000
Shareholders’ equity:
Ordinary share capital 3,825,000
Paid In Capital in Excess of Par 375,000
Retained earnings 2,718,000
Total shareholders’ equity 6,918,000
Total liabilities and shareholders’ equity 8,160,000

HEAVEN SPORTS CORPORATION

Statement of Cash Flows
for the Year Ended December 31, 2020

Cash Flow from Operating Activities:

Net Profit 2,268,000
Changes in Assets and Liabilities:
Increase in Accounts Receivable (45,000)
Decrease in Supplies 20,000
Increase in Prepaid Advertising (10,000)
Decrease in Prepaid Building Rental 600,000
Decrease in Accounts Payable (850,000)
Increase in Unearned Revenue 175,000
Increase in Salaries Payable 37,500
Increase in Utilities Payable 7,500
Increase in Income Tax Payable 972,000
Net Cash Flow from Operating Activities 3,175,000

Cash Flow from Investing Activities:

Acquisition of transportation Equipment (2,475,000)
Net Cash Flow from Investing Activities (2,475,000)

Cash Flow from Financing Activities:

Proceeds from issuance of Ordinary Share Capital 1,500,000
Payment of Cash Dividends (375,000)
Net Cash Flow from Financing Activities 1,125,000

Net Increase in Cash 1,825,000

Cash Balance, January 1 875,000
Cash Balance, December 31 2,700,000

Problem 2
 Starbucks Corporation
Balance Sheet
For Year Ended December 31, 2019

ASSETS Note
Current Assets
Cash and Cash Equivalents 116,000
Inventories 6 985,000
Trade and other Receivables 7 308,000
Prepaid Expense 31,000
Held Trading for Sale 8 160,000
Noncurrent asset held for sale 210,000
Total Current Assets 1,810,000
Noncurrent Assets
Property, Plant, & Equipment 9 2,053,000
Long-term Investment 10 445,000
Cash Surrender Value of Life Insurance 89,000
Intangible Assets 11 182,000
Total Noncurrent Asset 2,769,000
Total Assets 4,579,000
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Trade and other Payables 12 889,000
Provision 73,000
Total Current Liabilities 962,000
Noncurrent Liabilities
Long-term Borrowings 848,000
Total Noncurrent Liabilities 13 848,000
Total Liabilities 1,810,000
Shareholder’s Equity
Ordinary Share Capital (10 par per share; 120,000 shares 628,000
authorized; 62,800 shares issued and outstanding)
Preference Share Capital (100 par per share; 10,000 shares 400,000
authorized; 4,000 shares issued and outstanding)
Ordinary Share Premium 303,000
Preferred Share Premium 234,000
Retained Earnings 14 1,204,000
Total Shareholder’s Equity 2,769,000
Total Liabilities and Shareholder’s Equity 4,579,000

Note 6: Inventories
This line item consists of the following:

Raw Materials 222,000

Goods in Process 347,000
Finished Goods 416,000
Inventories 985,000

Note 7: Trade and Other Receivables

This line item consists of the following:

Accounts Receivable 323,000

Allowance for Bad Debts (15,000)
Trade and Other Receivables 308,000

Note 8: Trading Securities

This line item consists of the following:
 Trading Securities 150,000
Accumulated fair value 10,000
changes
Trading Securities 160,000

Note 9: Property, Plant and Equipment

This line item consists of the following:

Land 320,000
Building 1,824,000
Accumulated Depreciation- (622,000)
Building
Machinery 319,000
Accumulated Depreciation- (106,000)
Machinery
Equipment 530,000
Accumulated Depreciation- (212,000)
Building
Property, Plant and 2,053,000
Equipment

Note 10: Long-term Investment

This line item consists of the following:

Land held for Future Use 195,000

Held to Maturity Securities – 250,000
XYZ Bonds
Long-term Investment 445,000

Note 11: Intangible Assets

This line item consists of the following:

Patents 200,000
Accumulated Amortization- (18,000)
Patents
Intangible Assets 182,000

Note 12: Trade and other Payables

This line item consists of the following:

Income Taxes Payable 247,000

Accounts Payable 580,000
Unearned Revenues 62,000
Trade and other Payables 889,000

Note 13: Long-term Borrowings

This line item consists of the following:

Bonds Payable 800,000

Premium on Bonds Payable 48,000
Long-term Borrowings 848,000

Note 14: Retained Earnings

This line item consists of the following:

Retained Earnings 1,234,000

Impairment Loss (30,000)
Long-term Borrowings 1,204,000
 Problem 3

Function of Expense
GREEN COMPANY
Statement of Profit or Loss
for the Year Ended December 31, 2019
(Function of Expense)

Notes
Sales revenue 6 $ 3,359,000
Cost of goods sold 7 (1,657,000)
Gross profit 1,702,000

Operating expenses:
General and Administrative (596,000)
Selling Expense (581,000)
Total operating expenses (1,177,000)
Operating profit 525,000

Other income (expense): (102,000)

Profit before income taxes 423,000
Income tax expense (148,050)
Profit from continuing operation P 274,950

Discontinued operations:
Profit (Loss) from operations of 11 (350,000)
discontinued component
Income tax benefit(expense) 122,500
Profit (Loss) on discontinued operations 227,500
Net profit/(loss) 47,450
GREEN COMPANY
Statement of Profit or Loss
for the Year Ended December 31, 2019
(Nature of Expense)

Notes
Revenues:
Sales revenue 6 $ 3,359,000
Rent Revenue 105,000
Total Revenue 3,464,000
Expenses:
Cost of goods sold 7 (1,657,000)
Office Supplies Expense (19,000)
Office Salaries (320,000)
Insurance and Taxes (85,000)
Sales Commissions and Salaries (182,000)
Store Supplies Expense (56,000)
Delivery Expense (77,000)
Advertising Expense (170,000) Note 6: Net Sales
Interest Expense (37,000) This line item consists
Bad Debts Expense (27,000) of the following:
Depreciation – Building and Office Equipment (145,000)
Sales
Depreciation - Store Equipment 3,529,000 (96,000)
Less: Sales Discount
Loss on Sale of Equipment (49,000) (50,000)
Sales
LossReturns and Allowances
due to typhoon (121,000) (120,000)
Net Sales
Total Expenses 3,359,000 (3,041,000)
Discontinued operations:
Profit (Loss) from operations of discontinued (150,000) Note 7: Cost of Goods
component Sold
Loss on Sale of Assets (200,000)
Income tax benefit(expense) 122,500
Profit (Loss) on discontinued operations 227,500
Net profit/(loss) 47,450
 This line item consists of the following:

Inventory, January 1, 2019 341,000

Add: Freight In 135,000
Purchases 1,730,000
Less: Purchase Discounts (41,000)
Purchase Returns and Allowances (62,000)
Net Purchases 2,103,000
Less: Ending Balance, December 31 (446,000)
Cost of Goods Sold 1,657,000

Note 8: General and Administrative Expense

This line item consists of the following:

Office Supplies Expense (19,000)

Office Salaries (320,000)
Insurance and Taxes (85,000)
Depreciation – Building and Office (145,000)
Equipment
Bad Debts Expense (27,000)
General and Administrative Expense (596,000)

Note 9: Selling Expense

This line item consists of the following:

Sales Commissions and Salaries (182,000)

Store Supplies Expense (56,000)
Delivery Expense (77,000)
Advertising Expense (170,000)
Depreciation - Store Equipment (96,000)
Selling Expense (581,000)

Note 10: Other Income (Expense)

This line item consists of the following:

Rent Revenue 105,000

Interest Expense (37,000)
Loss on Sale of Equipment (50,000)
Loss due to typhoon (120,000)
Other Income (Expense) (102,000)

Note 11: Loss on Discontinued Operation

This line item consists of the following:

Revenues 900,000
Expenses (1,050,000)
Loss on Disposal of assets (200,000)
Loss on Discontinued Operation (350,000)

GREEN COMPANY
Statement of Changes in Equity
for the Year Ended December 31, 2019

Shared Capital Paid-In Capital in Retained Total

Excess of Par Earnings

Capital Beginning, January 1 700,000 610,000 1,785,000 3,095,000

Prior Year Adjustment (180,000) (180,000)
Adjusted Balances 700,000 610,000 1,605,000 2,915,000
Issued Share Capital 100,000 40,000 140,000
Distribution of Cash Dividend (60,000) (60,000)
Net Income 47,450 47,450
Capital Ending, December 31 800,000 650,000 1,592,450 3,042,450

Problem 4
Accounts Receivable /Sales
_______________________________________________________
Beginning balance 420,000

Sales 9,200,000

8,600,000 Cash received

Ending balance 1,020,000

Inventory
_______________________________________________________
Beginning balance 500,000

Purchased Inventory 3,350,000

3,200,000 COGS

Ending balance 650,000

Accounts Payable
_______________________________________________________
340,000 Beginning balance

3,350,000 Purchased Inventory

Payment to suppliers 3,635,000 _

55,000 Ending balance

Salaries Payable
_______________________________________________________
120,000 Beginning balance

2,100,000 Salaries Expense

Payment to employees 1,980,000 _

240,000 Ending balance

Rent Payable
_______________________________________________________
Beginning balance 12,000

125,000 Rent Expense

Cash Payment 131,000

18,000 Ending balance

Interest Payable
_______________________________________________________
0 Beginning balance

100,000 Interest Expense

Cash Payment 80,000 _

20,000 Ending balance

Income Tax Payable

_______________________________________________________
0 Beginning balance

1,004,700 Income tax Expense

Cash Payment 400,000 _

604.700 Ending balance

Miscellaneous Expense

_______________________________________________________

0 Beginning balance

270,000 Miscellaneous Expense

Cash Payment 270,000 _

0Ending balance

Property, Plant, & Equipment

_______________________________________________________
 Beginning balance 10,500,000

2,500,000 Equipment sold

Purchased 7,600,000 __

Ending balance 15,600,000

Accumulated Depreciation

_______________________________________________________

6,900,000 Beginning balance

750,000 Depreciation expense

Equipment sold 2,000,000

____________

5,650,000 Ending balance

Cash 800,000

Accumulated depreciation 2,000,000

PPE 2,500,000

Gain on sale of equipment 300,000

ALPHA COMPANY
Statement of Cash Flow
As of December 31, 2019
(Direct Method)

Cash flows from operating activities:

Cash inflows:
From customers 8,600,000
Cash outflows
To suppliers of goods (3,635,000)
To employees (1,980,000)
For Rent Expense (131,000)
For Interest Expense (80,000)
For income taxes (400,000)
For Miscellaneous Expense (270,000)
Net cash flows from operating activities 2,104,000

Cash flows from investing activities:

Sale of equipment 800,000
Purchase of long-term investment (4,000,000)
Purchase of Property, Plant, and Equipment (7,600,000)
Net cash flows from investing activities (10,800,000)
Cash flows from financing activities:
Issuance of ordinary shares 5,000,000
Payment of cash dividends (1,200,000)
Long Term Borrowings 6,000,000
Net cash flows from financing activities 9,800,000

Net increase in cash 1,104,000

Cash balance, January 1 430,000

Cash balance, December 31 1,534,000

ALPHA COMPANY
Statement of Cash Flows
for the Year Ended December 31, 2020
(Indirect Method)

Cash Flow from Operating Activities:

Net Profit 1,950,300
Adjustments for Non-Cash effects:
Depreciation Expense 750,000
Gain on Sale of Equipment (300,000)
Changes in Assets and Liabilities:
Increase in Accounts Receivable (600,000)
Increase in Prepaid Rent (6,000)
Increase in Inventory (150,000)
Decrease in Accounts Payable (285,000)
Increase in Salaries Payable 120,000

Increase in Interest Payable 20,000

Increase in Income Tax Payable 604,700
Net Cash Flow from Operating Activities 2,104,000

Cash Flow from Investing Activities:

Acquisition of Property Plant & Equipment (7,600,000)
Acquisition of Long Term Investment (4,000,000)
Sale of an Equipment 800,000
Net Cash Flow from Investing Activities (10,800,000)

Cash Flow from Financing Activities:

Proceeds from issuance of Ordinary Share Capital 5,000,000
Payment of Cash Dividends (1,200,000)
Long Term Borrowings 6,000,000
Net Cash Flow from Financing Activities 9,800,000

Net Increase in Cash 1,104,000

Cash Balance, January 1 430,000
Cash Balance, December 31 1,534,000