High Quality Toys, Inc. (HQT), was formed on January 1, year 1, by issuing 30,000 shares...

 

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High Quality Toys, Inc. (HQT), was formed on January 1, year 1, by issuing 30,000 shares of $1 par value common stock for $100,000. On that same date, HQT also Received $150,000 cash by signing a 6% note payable. The note requires that HQT make payments of $30,000 plus interest each December 31 for 5 years. • Acquired a piece of machinery and a truck as part of one purchase for $200,000 cash. The machine had a list price of $168,000 and the truck had a list price of $72,000. Freight cost amount to $300 for the machinery only. There was no delivery charge associated with the truck. Costs to install the machine were $400. The company had to hire a specialist to calibrate the machine. The specialist's fee was $200. Other facts related to Year 1: Purchase of the new machine will allow HQT to produce a new product for the local market. Advertising to promote the new product during the first year of operation amounted to $6.000. Other selling and administrative expenses for the period were $54,000. ● ● ● . During Year 1, HQT produced $300,000 in inventory of the new product. The machine has a 10-year useful life and an expected salvage value of $3,900. Sales of the new product amounted to $400,000. Related cost of goods sold were $225,000. The truck has a 5-year useful life and an expected salvage value of $7.000. Required 1. Add labels to the first blank line in the horizontal statements model to reflect the components of each statement: Assets, Expenses, Liabilities, Net Income, Revenue, and Stockholder's Equity. 2. Add the account titles to the second blank link, grouping them according to the appropriate component of each statement. HQT uses the following account titles: Accumulated Depreciation, Cash, Common Stock, Inventory, Machines, Note Payable, Paid-In Capital in Excess of Par, Retained Earnings, Truck. 3. Record the transactions related to the (1) issuance of common stock, (2) signing of note payable, (3) purchase of the machine and truck (include all costs that should be capitalized), (4) selling and administrative expense for the first year, (5) production of inventory (assume all costs other than depreciation on the machine were paid in cash) (6) sales for the first year. (7) depreciation on the truck for the first full year of operation, and (8) interest expense for the first full year of the note payable and the first payment on the note. 4. Due to increased demand, HQT believes cost of goods sold will be 25% more in Year 2. If they wish to end Year 2 with $30,000 in inventory, what amount of inventory should be produced in Year 22 High Quality Toys, Inc. (HQT), was formed on January 1, year 1, by issuing 30,000 shares of $1 par value common stock for $100,000. On that same date, HQT also Received $150,000 cash by signing a 6% note payable. The note requires that HQT make payments of $30,000 plus interest each December 31 for 5 years. • Acquired a piece of machinery and a truck as part of one purchase for $200,000 cash. The machine had a list price of $168,000 and the truck had a list price of $72,000. Freight cost amount to $300 for the machinery only. There was no delivery charge associated with the truck. Costs to install the machine were $400. The company had to hire a specialist to calibrate the machine. The specialist's fee was $200. Other facts related to Year 1: Purchase of the new machine will allow HQT to produce a new product for the local market. Advertising to promote the new product during the first year of operation amounted to $6.000. Other selling and administrative expenses for the period were $54,000. ● ● ● . During Year 1, HQT produced $300,000 in inventory of the new product. The machine has a 10-year useful life and an expected salvage value of $3,900. Sales of the new product amounted to $400,000. Related cost of goods sold were $225,000. The truck has a 5-year useful life and an expected salvage value of $7.000. Required 1. Add labels to the first blank line in the horizontal statements model to reflect the components of each statement: Assets, Expenses, Liabilities, Net Income, Revenue, and Stockholder's Equity. 2. Add the account titles to the second blank link, grouping them according to the appropriate component of each statement. HQT uses the following account titles: Accumulated Depreciation, Cash, Common Stock, Inventory, Machines, Note Payable, Paid-In Capital in Excess of Par, Retained Earnings, Truck. 3. Record the transactions related to the (1) issuance of common stock, (2) signing of note payable, (3) purchase of the machine and truck (include all costs that should be capitalized), (4) selling and administrative expense for the first year, (5) production of inventory (assume all costs other than depreciation on the machine were paid in cash) (6) sales for the first year. (7) depreciation on the truck for the first full year of operation, and (8) interest expense for the first full year of the note payable and the first payment on the note. 4. Due to increased demand, HQT believes cost of goods sold will be 25% more in Year 2. If they wish to end Year 2 with $30,000 in inventory, what amount of inventory should be produced in Year 22

Answer rating: 100% (QA)

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