Use the financial statement effects template below for Questions (a) to (k) to undertake the transaction analysis:

Balance Sheet						Income Statement
CA	NCA	L	CC	EC		R	E	NI

CA = Cash Assets; NCA = Non-cash assets; CC = Contributed capital; EC = Earned capital; R = Revenue; E = Expense; NI = Net income

Instructions for using financial statement effects template:

• Indicate an increase in the account by a “+” sign and decrease in the account by “-” sign
• Use appropriate account name in the non-cash assets, liabilities, capital and expense column.
• Show your working

a) Globe sells 2,750 units of inventory on account at a selling price of $125 per unit. The unit cost of the inventory for Globe was $70 per unit.

b) Globe borrowed $1,800,000 from the local bank on 3/01/20Y1 (expected repayment by 2/1/20Y5). The annual interest rate is 8%. Interest are due for payment at every six months. Record the transactions for accrued interest on 6/30/20Y1 (i.e., balance date) in the template.

c) Globe issued 40,000 shares at $15 per share. Show your working.

d) Globe bought inventory for resale at a cost of $24.5 million on account.

e) Inventory costing $12 million are sold for $18 million on account.

f) Globe incurred $8,500 in wages in the last week of June 20Y1, which will be paid in the first week of July 20Y1 (i.e., in the next fiscal year, because the balance date is June 30, 20Y1)

g) Globe estimates that the allowance for an uncollectible accounts at the end of the period would be $150,000. The beginning balance of the allowance account was $130,000. During the period $90,000 of bad debt was written off. Record the following in the template:

• Bad debt expense for the year
• Writing off of the bad debt

h) Globe received $97,000 cash in advance to provide consulting services. Only, $35,000 of services are provided at the end of the fiscal year, that is June 30, 20Y1. Record the followings:

• Receipt of cash of $97,000
• Adjustment entry at the end of the year

i) Globe purchase an equipment for $2,000,000 on January 1st, 20Y1. The useful life of the equipment is 20 years after which, it would be sold at an estimated price of $200,000. Record depreciation using straight line method at the end of the fiscal year (i.e., on June 30, 20Y1). Show your working.

j) Globe paid for the inventory that was purchased at a cost of $24.50 million on account in Transaction # 4.

k) Globe paid 12 months insurance $6,000 in advance for equipment on January 1st, 20Y1. Record this transaction including the adjustment entry needed to be provided at the end of the fiscal year (i.e., on June 30, 20Y1) to recognize insurance expense related to the fiscal year ended at June 30, 20Y1. Show your working.

l) Globe recorded $150 million sales during the fiscal year 20Y1 and estimated a warranty cost of 1.2% of the total sales for the year. At the beginning of the Globe’s balance sheet included a warranty payable of $0.8 million and at the end of the year the warranty payable balance was $0.6 million. Record the warranty expense and warranty paid in 20Y1 in the template.

Answer rating: 100% (QA)

Please hit like button if answer helped Balance Sheet Income Statement CA NCA ... View the full answer