BUS FPX 4060 Assessment 4 Accounting for Liabilities and Equity

Student Name

Capella University

BUS-FPX4060 Financial Accounting Principles

Prof. Name:

Date

Financial Accounting Principles

Assessment 4: Accounting for Liabilities and Equity Worksheet

This assessment covers the analysis of liabilities and equity in three exercises. The instructions provide guidance for journal entries, calculations, and financial reporting for various transactions. All responses follow APA formatting.

Exercise 4-1: Accounting for Liabilities

During 2011 and 2012, Data Resources, Inc. engaged in several financial transactions involving short-term liabilities. The following steps outline the required analysis and journal entries:

Key Requirements

Determine Note Maturity Dates and Interest:
- Calculate the maturity dates and interest amounts for each note.
- Interest calculations assume a 360-day year.
Journal Entries:
- Record all transactions for 2011 and 2012, including accrued interest and payments.

Key Transactions and Interest Calculations:
| Date | Transaction Details | Maturity Date | Interest Due |
|—————|———————————————|—————|————–|
| Mar 19, 2011 | Purchased merchandise on credit terms | N/A | N/A |
| Apr 29, 2011 | Replaced accounts payable with 120-day note | Aug 27, 2011 | $816.67 |
| Jun 16, 2011 | Borrowed cash on a 90-day note | Sep 14, 2011 | $1,100.00 |
| Oct 30, 2011 | Borrowed cash on a 90-day note | Jan 28, 2012 | $315.00 |

Interest Expenses:
| Year | Adjusting Entry | Interest Amount |
|—————|———————————————|—————-|
| 2011 | Adjusted accrued interest for UCB note | $213.50 |
| 2012 | Recorded interest expense at note maturity | $101.50 |

Journal Entries for Transactions (2011-2012):

Date	Account	Debit	Credit
Mar 19, 2011	Merchandise Inventory	$41,250
	Accounts Payable		$41,250
Apr 29, 2011	Accounts Payable	$41,250
	Cash	$6,250
	Notes Payable		$35,000
Jun 16, 2011	Cash	$55,000
	Notes Payable		$55,000
Aug 28, 2011	Notes Payable	$35,000
	Interest Expense	$816.67
	Cash		$35,817
Dec 31, 2011	Interest Expense	$213.50
	Interest Payable		$213.50

BUS FPX 4060 Assessment 4 Accounting for Liabilities and Equity

Exercise 4-2: Accounting for Bonds

On January 1, 2012, Fromer issued $3,000,000 in 12-year bonds at a 7% annual interest rate, payable semi-annually. The issue price was $2,592,000, reflecting a discount.

Journal Entries:

Date	Account	Debit	Credit
Jan 1, 2012	Cash	$2,592,000
	Discount on Bonds Payable	$408,000
	Bonds Payable		$3,000,000

Interest Expense Calculation:

Cash Payment Per Period: $105,000
Straight-Line Amortization: $17,000
Total Interest Expense Per Period: $122,000

Amortization Table (First Two Years):

Semiannual Period-End	Unamortized Discount	Carrying Value
1/2011	$408,000	$2,592,000
6/2011	$391,000	$2,609,000
12/2011	$374,000	$2,626,000
6/2012	$357,000	$2,643,000
12/2012	$340,000	$2,660,000

Journal Entries for Interest Payments:

Date	Account	Debit	Credit
Jun 30, 2012	Bond Interest Expense	$122,000
	Discount on Bond Payable	$17,000
	Cash		$105,000

Exercise 4-3: Stockholders’ Equity

Stockholder transactions for TransWorld Inc. in 2011 affected the equity accounts.

Key Transactions:

Date	Description	Amount
Jan 1, 2011	Treasury stock purchase	$48,000
Jan 7, 2011	Dividend declaration	$69,000
Dec 31, 2011	Net income credited	$188,000

Statement of Retained Earnings (2011):

TransWorld Inc.
Retained Earnings Statement
| Item | Amount |
|————————–|————–|
| Beginning Retained Earnings | $430,000 |
| Add: Net Income | $188,000 |
| Subtract: Dividends Paid | ($144,000) |
| Ending Retained Earnings | $472,800 |

Stockholders’ Equity Section:

TransWorld Inc.
Stockholders’ Equity Section as of December 31, 2011
| Item | Amount |
|————————–|————–|
| Common Stock | $375,000 |
| Paid-In Capital | $90,000 |
| Retained Earnings | $472,800 |
| Total Equity | $937,800 |