a strategic marketing consulting firm

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TEST 1

Question 1:

Clear Strategy Corp., a strategic marketing consulting firm, began operations on January 1, 2016. Its post-closing trial balance at December 31, 2016, and 2017, is shown below along with some other information.

Other information regarding Clear Strategy Corp. and its activities during 2017:

1. Assume all accounts have normal balances.
2. Share dividends were declared and issued during the year.
3. Equipment was sold for cash equal to its book value.

Required:

Prepare a statement of cash flows for 2017 using the direct method to report cash inflows and outflows from operating activities.

Other information:

1. All accounts payable balances result from other expenses.
2. All consulting revenue is done on credit.
3. All credits to accounts receivable are receipts from customers.
4. All debits to accounts payable result from payments for other expenses.

Question 2:

Zhang Systems Inc. began operations on January 1, 2016. Its post-closing trial balance at December 31, 2016, and 2017, is shown below along with some other information.

Other information:

1. All accounts payable balances result from merchandise purchases.
2. All sales are credit sales.
3. All credits to accounts receivable are receipts from customers.
4. All debits to accounts payable result from payments for merchandise.
5. All other expenses are cash expenses.

Other information regarding Zhang Systems Inc. and its activities during 2017:

1. Assume all accounts have normal balances.

2. Cash dividends were declared and paid during the year.
3. Plant assets were sold for cash equal to book value during the year.

Required:

Prepare a statement of cash flows for 2017 using the direct method to report cash inflows and outflows from operating activities.

Question 3:

Using the information from the alphabetized post-closing trial balance below, prepare a classified balance sheet for Malta Industries Inc. as at October 31, 2017. Be sure to use proper form, including all appropriate subtotals.

Question 4:

The equity sections from the 2017 and 2018 balance sheets of The Saucy Bread Company Inc. appeared as follows:

On February 11, May 24, August 13, and December 12, 2018, the board of directors declared $0.30 per share cash dividends on the outstanding shares. 7,500 common shares were issued on August 1, 2018, and another 10,000 were issued on November 2, 2018.

Required:

Under the assumption that there were no transactions affecting retained earnings other than the ones given, determine the 2018 profit of the company. Show your calculations.

Question 5:

Required:

Refer to the equity section above. Assume that the preferred shares are convertible into common at a rate of eight common shares for each share of preferred. If 1,000 shares of the preferred are converted into common shares on December 1, 2017, prepare the entry and describe how this affects the equity section of the balance sheet (immediately after the conversion).

Question 6:

Required:

1. Calculate A assuming an average issue price of $12 per share.
2. Calculate B assuming an average issue price of $60 per share.
3. Calculate C assuming the average issue price was $3.00 per share.
4. Calculate D.
5. Calculate E assuming that Rainchief Energy Inc. showed profit/losses for the years ended October 31, 2014, 2015, 2016, and 2017, of $1,500,000, $1,050,000, $780,000, and $(1,320,000) respectively. Dividends totalling $720,000 were declared and paid during the year ended October 31, 2014. No other dividends have been declared to date.
6. Calculate F.
7. Calculate any dividends in arrears as at October 31, 2017 (all of the shares were issued early in 2014).

Question 7:

Kangaroo Media Inc. has issued and outstanding a total of 40,000 shares of $7.20 preferred shares and 120,000 of common shares. The company began operations and issued both classes of shares on January 1, 2016.

Required:

1. Calculate the total dividends to be paid to each group of shareholders in each year by completing the following chart. Assume that the preferred shares are cumulative.

2. Calculate the total dividends to be paid to each group of shareholders in each year by completing the following chart. Assume that the preferred shares are non-cumulative.

Question 8:

The balance sheet for QuickStream Inc. reported the following components of equity on December 31, 2017:

The company completed these transactions during 2018:

Required:

1. Prepare general journal entries to record the transactions and closings for 2018.
2. Prepare a statement of changes in equity for the year ended December 31, 2018.
3. Prepare the equity section of the company’s balance sheet as of December 31, 2018.

Question 9:

Labtech Pharmacy Inc. is authorized to issue an unlimited number of common shares and 100,000 shares of $24 non-cumulative preferred. The company completed the following transactions:

Required:

1. Prepare general journal entries to record the transactions.
2. Prepare a statement of changes in equity for the year ended December 31, 2017.
3. Prepare the equity section of the balance sheet as of the close of business on December 31, 2017.

Question 10:

Pace Oil & Gas Corp. began operations in 2015. Its balance sheet reported the following components of equity on December 31, 2015.

The corporation completed these transactions during 2016 and 2017:

Required:

1. Prepare journal entries to record the transactions and closings for 2016 and 2017.
2. Prepare the statement of changes in equity for the year ended December 31, 2017.
3. Prepare the equity section of the company’s balance sheet as of December 31, 2017.

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