Smyth Corporation had the following balances at 12/31/x1.
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CASH
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$2,000,000
|
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INVESTEMENTS
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3,750,000
|
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ACCOUNTS RECEIVABLE (NET)
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5,500,000
|
|
INVENTORIES
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2,600,000
|
|
PP&E (NET)
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5,550,000
|
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ACCOUNTS PAYABLE
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4,410,000
|
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INTREST PAYABLE
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88,000
|
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ACCRUES VACATION PAY
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9,000
|
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LIABLITY FOR PRODUCT WARRANTIES
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22,000
|
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NOTES PAYABLE (longterm)
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7,000,000
|
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BONDS PAYABLE
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5,000,000
|
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COMMON STOCK
|
1,000,000
|
|
COMMON STOCK DIVIDENTS DISTRIBUTABLE
|
1,000
|
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RETAINED EARNINGS (1/1/X1)
|
370,000
|
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SALES
|
20,000,000
|
|
COGS
|
10,900,000
|
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OPERATING EXPENSES
|
5,700,000
|
|
INTREST EXPENSE
|
1,900,000
|
Additional information. NO adjustments have been made for any of the additional information. No reversing entries were made at1/1/x1. ( Hints!! Do NOT change "CASH." Financial statements are not issuded until March of x2.)
a. Smith has a policy that allows employees 10 vacation days annually.The vacation days vest after an employee has been employeed for sixmonths. Smyth has a workforce of 20 employees each of whom has beenwith the company for at least 3 years. The average weekly salary is1,000. (assume a 5 day work week.) During the year employees tookvacation hours totaling 105 days. The bookkeeper debited WageExpense when the employees were paid for these days.
b. Salaries include state sales tax of 6%. The bookkeeper debits SalesTax Expense when sales taxes are paid to the state. At the yearend, sales tax of $15,00 is due to the stae. Sales Tax Payable at1/1/x1 was zero.
c. Warranty cost are estimated at 1.6% of selling price. Actualwarranty costs incurres during the year totaled $245,000. The bookkeeper debts warranty expense as these costs are incurred.
d. The corporate tax is 40%.
e. The company president recieves a bonus based upon 10% of netincome.
f. $1,500,000 of the bonds mature 6/30/x2. The minutes of the lastboard meeting state that the company plans to refinance the bondson a long-term basis when they mature. You have determined that the company has no commitments from any lender.
g. 1,000,000 of the bonda matured 1/31/x2. They were extinguished byissuing common stock.
h. Smyth issued a 2 year, $90,000, nonintrest bearing note on 12/31/x1for the purchase of a machine. The market rate of intrest is8%.
i. Cash dividends of $12,000 were declared on 12/15/x1 to be paid tostockholders of record on 12/15/x1 to be paid to stockholders ofrecord on 1/15/x2 to be paid 1/31/x2.
j. The company is suing a competitor for patent infrigement. Theattonys believe that Smyth will win the law suit. The settlementmay be for as much as $150,000. The attorney's believe thatSmyth will probaly revieve $60,000. (** I do not think contigencesare included if they are gain contingeces due to the conservatismapproach.)
k. The company is being sued by a customer who was hurt while visitingthe office. The attorney's believe Smyth may lose as much as100,000 but that the customer will probably settle for 30,000. (**I think you record the 30,000 b/c it is the smaller of thenumbers)
Required:
1.) Prepare a balance sheetand income statement for Smyth Corporation. Show calculationsrelated to the above additional information.