ACCT551 Week 7 Course Project Submission 2021

ACCT551 Course Project Instructions and Data                                                                                                                                                  

This Course Project applies financial reporting principles relating to intangibles, current liabilities, and long-term liabilities for a ficititious (though realistic) company scenario.                                                                                                                                                                                                                      

GeneralProducts, Inc. was incorporated in Nevada on January 1, 2016, to take over a local retail chain and supply goods to customers at the most competitive prices, both in stores and online.                                                                                                                                                                                                                    

To complete this project, you’ll need to use the financial information below provided for the year 2019 along with the prior year’s Balance Sheet (dated December 31, 2018).      

GeneralProducts, Inc.

Balance Sheet

As of December 31, 2018

ASSETS

Current Assets

Cash                                                                   11,980

Accounts Receivable                                                                   20,520

Inventory                                                                         3,17,060

Inventory of Premiums (@$1.10 per premium item)                                                                      660

Total Current Assets                                                                                3,50,220

Long-Term Assets

Investments                                                                   66,775

Property, Plant, and Equipment (PP&E)                                                              7,50,000

Less: Accumulated Depreciation                                                             -90,000 6,60,000

Total Long-Term Assets                                                                                         7,26,775

Intangible Assets

Trademarks                                                                                     1,90,000

Total Assets                                                                                            12,66,995

 

LIABILITIES

Current Liabilities

Accounts Payable                                                                         50,722

Liability for Premiums                                                                 550

Interest Payable (on 6% Bonds)                                                                              3,000

Total Current Liabilities                                                                                          54,272

Long-Term Liabilities

6% Bonds Payable (due 2023)                                                                  1,00,000

Unamortized Discount on Bonds Payable                                                                           (6,732)

Total Long-Term Liabilities                                                                                    93,268

Total Liabilities                                                                                       1,47,540

 

STOCKHOLDERS' EQUITY

Common Stock

(150,000 shares authorized, par value $1,

130,000 shares issued and outstanding)                                                                1,30,000

Paid-in Capital in Excess of Par - Common Stock                                                                  9,54,000

Retained Earnings                                                                            35,455

Total Stockholders' Equity                                                                                 11,19,455

 

Total Liabilities and Stockholders' Equity                                                                                     12,66,995

GeneralProducts, Inc., provided the following financial and business-related data for 2019 below.                                                                                                                                                      

Item #                                                                                                                                                                                 

1              Trademarks were previously acquired for $200,000 on January 1, 2018. Estimated useful life at the time of acquisition was 20 years.                                                                                                                                                                 

In 2019, there was litigation challenging these trademarks brought by a competitor, and GeneralProducts successfully                                                                                                                                                                    

defended these trademarks at a legal cost of $45,000. The new (updated) useful life of the trademarks was estimated to be 25 years from the date of acquisition.                                                                                                                                                                   

2              All sales were on credit and totaled $940,560. COGS totaled $780,650.                                                                                                                                                                   

3              Included in the total sales of $940,560 were the sales of 6,000 soap powder boxes.                                                                                                                                                                          

As a premium offer to increase soap powder sales, GeneralProducts includes one special coupon with every soap powder box. Customers can redeem four coupons                                                                                                                                                                         

to obtain one free premium item—a kitchen utensil.  Based on past experience, 60% of the coupons are expected to be redeemed by customers.                                                                                                                                                                    

During 2019, 3,400 coupons were actually redeemed. Also in 2019, GeneralProducts purchased                                                                                                                                                                         

an additional 1,000 premiums (kitchen utensil items) @ $1.10 each on credit to add to its Inventory of Premiums.                                                                                                                                                              

4              Five-year 6% bonds were issued on January 1, 2018, sold to yield 8% interest. Interest is paid semiannually on January 1 and June 30 for these bonds.                                                                                                                                                                               

Maturity value of the bond issue is $100,000 and the issue was sold at a discount of $8,111 for an initial carrying value of $91,889.                                                                                                                                                                          

The bond indenture indicated that GeneralProducts may later call and redeem these bonds @101 any time after June 30, 2019.                                                                                                                                                                       

These bonds were subsequently called and redeemed on September 1, 2019, following the sale of a new 5% bond issue                                                                                                                                                                       

taking advantage of lower interest rates (see Item 5 below). The effective-interest method is applied to amortize the discount.                                                                                                                                                                             

5              To take advantage of lower interest rates and to finance the call and redemption of the previously issued 6% bonds @ 101,                                                                                                                                                                         

on September 1, 2019, GeneralProducts issued new 5% bonds with face value of $100,000 to yield 6%.                                                                                                                                                                             

The maturity period of these new 5% bonds is 10 years and interest is paid semiannually on January 1 and June 30.                                                                                                                                                                 

The new 5% bonds were issued at a discount of $7,438 for an initial carrying value of $$92,562 on July 1, 2019.                                                                                                                                                                 

The effective-interest method is applied to amortize the discount.                                                                                                                                                                            

6              Selling and administrative expenses excluding noncash items totaled $87,345. PP&E is depreciated using the straight-line method over 25 years of life.                                                                                                                                                                                

7              Cash collected from customers totaled $906,450.                                                                                                                                                                             

  8              Cash paid to suppliers for credit purchases totaled $728,254.                                                                                                                                                                       

  9              Purchases of inventory totaled $689,525. All purchases were on credit.                                                                                                                                                                 

10           GeneralProducts purchased land for $30,000 in advance of construction of a building and paid in full.                                                                                                                                                                   

                                                                Requirements to Be Completed                                                                                                                                               

                                Requirement                                                                                                                                                                                   

1              Record the necessary journal entries for the year 2019.                                                                                                                                                                 

2              Prepare the Income Statement and Statement of Retained Earnings for the year 2019.                                                                                                                                                                     

3              Prepare the classified Balance Sheet as of December 31, 2019.                                                                                                                                                                    

4              Show full calculation work!                                                                                                                                                                         

Please round your calculated answers to the closest dollar and ignore taxes.