Jan 1) Peloton began operation in 2021 and sold $50,000,000 common stocks (1,000,000 shares @ $50 per share).

Feb 1) Purchased 10,000 bikes from a manufacturer for $1,500 each, on account.

May 1) Paid off a half of the account payable to the manufacture.

Jul 1) Repurchased 500,000 shares of common stocks @$80 and kept as treasury stocks.

Aug 1) Sold 1,500 bike packages. The package is priced at $2,000 for a bike (paid immediately in cash) plus membership fee for workout streaming at $70 per month for one year. Membership fees are due at the end of each month for 1-year. A stand-alone price for the bike is $2,700 and a membership-only fee is $100 per month. Bikes were delivered immediately. The cost for Peloton to provide the streaming service is $2 per month per member, paid in cash.

Oct 1) Sold 3,000 stand-alone 1-year memberships. The membership fee $100 is due at the end of each month.

Oct 15) Sold 2,000 stand-alone bikes on account. Delivery was delayed till Feb 2022.

Nov 15) Early November, Peloton announced the introduction of “membership PLUS” starting service from Nov 15. It is a flexible version of the stand-alone membership program costing @150 per month, renewable on a month basis (without a one-year contract). For members signed up before 15^st of each month, a monthly fee for the month is charged on 14^th of month. For example, for members signed up before Nov 15, the subscription is effective from Nov 15 to Dec 14 and fee is charged on Dec 14. For cancelling members, the service is effective till the nearest 14^th and the fee will charged for the last time on 14^th. By Nov 14, 5,000 members signed up for “membership PLUS”.

Dec 14) Charged the “membership PLUS” fees.

Dec 15) By Dec 14, 4,000 members renewed “membership plus” and 2,000 newly signed up (i.e., the total number of PLUS members for the Dec 15-Jan 14 cycle has increased to 6,000.)

Dec 31) Income tax expense was 25% of income from operation. The tax payment to IRS, which is assumed to be the same as income tax expense, is recorded as income tax payable at the end of the year and is due next Feb.

1. Make journal entries for 2021.
2. Prepare the balance sheet for 2021.
3. (only for presenting groups) Prepare Statement of Cash Flows for 2021 using the indirect method for Cash flow from operation.
4. (only for presenting groups) Calculate the basic EPS for 2021.

PART B

Jan 1, 2021) Toll Brothers began operation in 2021 and sold 1 million shares of common stocks @$10 per share.

Jan 1, 2021) Borrowed $10 million from a local bank and wrote a 10-year notes with 12% annual interest payable on Dec 31 of each year.

Jan 1, 2021) Purchased construction materials from a manufacturer for $5 million in cash.

Jan 1, 2021) received a contract to build an office building for $4.5 million. Harding will construct the building according to specifications provided by the buyer, and the project is estimated to take three years to complete. According to the contract, Harding will bill the buyer $1.5 million per year in installments over the construction period according to a prearranged schedule. Information related to the contract is as follows.

(in $thou)	2021	2022	2023
Construction costs incurred during the year	1,100	900	1,200
Construction costs incurred in prior years	-	?	?
Cumulative actual construction costs	?	?	?
Estimated costs to complete at end of year	1,900	1,100	-
Total estimated and actual construction costs	?	?	?
Total estimated revenue	4,500	4,500	4,500
Billings made during the year	1,500	1,500	1,500
Cash Collections during the year	1,200	1,600	1,700

Jan 1, 2022) Sold 2 million common stock shares @$30 per share.

Sep 1, 2022) Repurchased 1 million common stock shares @$50 per share and kept them as treasury stocks.

Mar 1, 2023) Repurchased 1 million common stock shares @$40 per share and retired them.

*In 2022 and 2023, there was no other transaction except for the long-term construction in progress.

* Income tax expense was 25% of income from operation. The tax payment to IRS, which is assumed to be the same as income tax expense, is recorded as income tax payable at the end of the year and is due next Feb.

*Billings are made on Jan 1 of each year. Cash is collected on Feb 1 of each year.

*Revenues/costs are recognized on Dec 31 of each year, if there is any revenue/cost to recognize for the project.

1. Assume Toll Brothers uses the “upon completion method.”
   1. Make journal entries for 2021-2013.
   2. Prepare the balance sheets for 2021-2013.
   3. (only for presenting groups) Calculate the basic EPS for 2012-2013

2. Assume Toll Brothers uses the “% completion method.”
   1. Make journal entries for 2021-2013.
   2. Prepare the balance sheets for 2021-2013.
   3. (only for presenting groups) Calculate the basic EPS for 2012-2013

Answer rating: 100% (QA)

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