Micks Photographic Equipment began operations on January 1, 2017. During 2017, the company entered into the following

Question:

Mick’s Photographic Equipment began operations on January 1, 2017. During 2017, the company entered into the following transactions:
1. Issued 50,000 shares of $15 par value common stock for $30 per share in exchange for cash. Also issued, for cash, 1,000 shares of 10 percent, $100 par value preferred stock for $102 per share.
2. Purchased $750,000 of equipment in exchange for cash.
3. Issued 20 bonds, each with a face value of $1,000, at 146 (annual coupon rate = 16 percent and annual yield rate = 10 percent). The bonds pay interest semiannually on December 31 and June 30.
4. Purchased land in exchange for 1,000 shares of $15 par value common stock. The shares were selling for $40 per share at the time.
5. Purchased $2,000,000 of inventory on account. $1,075,000 was subsequently paid during 2017.
6. Sold $2,050,000 of inventory in exchange for cash. The related inventory had cost $875,000.
7. Purchased a two-year insurance policy for $80,000.
8. Purchased short-term investments for $250,000.
9. Sold $880,000 of inventory on account. The related inventory had a cost of $490,000. $500,000 of the sales made on account were collected during the year.
10. Paid $500,000 in miscellaneous expenses (rent, utilities, and wages).
11. Declared, but did not pay, a $100,000 dividend.
12. Made the first interest payment on the bonds on December 31.

REQUIRED:
a. Prepare journal entries for each of the original and adjusting transactions. Establish T-accounts for each account. Post the entries to the T-accounts.
b. Prepare the necessary closing entries. Post these entries.
c. Prepare the income statement and balance sheet for Mick’s Photographic Equipment for the year ended December 31, 2017.
d. Prepare the statement of cash flows for Mick’s Photographic Equipment for the year ended December 31, 2017, using both the direct and indirect methods.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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