lucillea
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Joined: 28 May 2012
Location: United States
Online Status: Offline
Posts: 3
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| Posted: 10 Jun 2012 at 04:18 | IP Logged
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Ken Corporation has the following information related to the items above:
Your assignment is to disclose the information in the financial statements
based on the following items. Please do not plagiarize, as your project
will be put through turnitin, and any plagiarism will be dealt with
according to the Keller student code of conduct.
Ken Corporation is in the process of preparing its annual financial
statements for the fiscal year ending, December 31, 2012. The company
sells widgets to various manufactures and stores in the area. They are
publicly traded.
The inventories are valued at Lower cost or market. Inventory is done on
the LIFO basis. The company also had a loss in inventory at yearend of $
300,000, due to obsolescence.
Property, Plant and Equipment: Are classified in the following major
categories: Land, office buildings, furniture and fixtures, equipment, and
leasehold improvements. All fixed assets are carried per U.S. Gaap
requirements for cost. The depreciation methods used depend on the
type of asset, and when it was acquired. The following are straight line:
Office buildings, furniture and fixtures, and equipment. Leasehold
improvements are depreciated using the sum of year’s method.
Kens Corporation plans to present the inventory and fixed amounts in its
December 31, 2012 balance sheet as shown below:
Inventories: $ 4, 814,200
PPE (net of Depreciation) ; $ 6,310,000
The next event that occurs is that on November 10, 2012, a Ken Corp.
truck was in an accident, driven by Ken. Ken received a notice of a lawsuit
in seeking $ 800,000 in damages for personal injuries suffered by the
other driver. Ken Corp’s counsel believes that it is reasonably possible
that the other driver will be awarded an estimated amount of between $
500,000 and $ 1,000,000. And that $ 750,000 is a better estimate of
potential liability than any other amount.
In the beginning of 2012, Ken Corp changed its salvage value of
equipment from 3 to 5 years. The change is material in the financial
statements.
On January 2, 2013, sold, 10,000 shares of common stock, par value of $
1.00 per share, to Ken, CEO of Ken Corporation. The market price of the
stock at that time was $ 10.00 per share. This is done every year, per
Ken’s employment contract.
On June 1, 2012, Ken Corp acquired 100% of Chris Corp, under the
Acquisition method of accounting. As part of this transaction, Ken paid $
1,000,000 in cash, and issued 40,000 shares of stock at a price of $
15.00 a share to the shareholders of Chris Corp. Ken paid more for Chris
Corp, and then it was worth (Goodwill).
Leases: Ken acquired an asset, as part of a capital lease on March 1,
2012. The assets present value was $ 150,000, and the interest rate on
the lease was 5%. The due date is March 1, of every year. The current
amortization charge for the next 3 years is: 3,000, 4,000 and $ 5,000.
The lease is subject to renewal in 2015, and has a bargain purchase
option at the end of the lease (February 28, 2015) in the amount of $
20,000.
The company had Earnings per share of $ 3.00 on Income from Cont.
Operations, $ 1.90 on Net income. They also had a discontinued
operation with a loss of $ 1.20, and an extraordinary items with a and $
.10 gain on an extraordinary item (flood).
Ken Corp, issued bonds on June 1, 2012. These bonds are term bonds,
due on May 31, 2020. We issued 1,000 bonds in $ 1,000 apiece.
The interest rate on the bonds was 10% coupon rate, with a market rate of
12%. They can be called early on May 31. 2016 at a price of 1.01. There
is also a sinking fund set up to pay off the bonds at maturity. The
maturity for the next 2 years for the sinking fund is: 2013: $ 40,000
2014: $ 50,000
Dividends:
We have 2 classes of stock. First, is preferred stock. It is 6% cumulative
preferred stock, par value $ 100, authorized 100,000, issued and
outstanding 20,000. It has limited voting rights.
Common stock Par value $ 1.00, authorized 300,000, issued 750,000,
outstanding 700,000. 50,000 shares of common stock are treasury stock,
held by the company. We used the cost method in acquiring our stock.
We last paid dividends on December 31, 2010.
Ken Corp has a compensatory Stock Option plan for all senior executives.
The options are valued at the fair value of the options issued. The
number of options that are issued are 50,000, at the option price of $
2.00. The exercise date of the options is January 1, 2015. The grant date
is January 1, 2012. The vesting period is from January 1, 2012 through
December 31, 2014.
We have different investments that we purchase and buy of other
companies. We account for these investments as part of FASB 115, mark
to market securities.
The following took place in 2012.
1. We purchased 100 bonds $ 1,000 a piece of Alex Corp in the
amount of $ 100,000, on January 1, 2012. . The bonds pay interest of
6%, and pay interest on June 30, and December 31 every year. We intend
to hold these bonds until they mature on December 31, 2020. At
December 31, 2012 the fair value of the bonds was $ 1.10 per bond. The
company can call the bonds early, on December 31, 2015 at a price of
1.06.
2. We purchased 5,000 shares of Adams Corp, 6 % cumulative preferred
stock, par value $100, of Adam’s corp, in the amount of $ 500,000,
purchased at par value, on July 1, 2012. At the end of 2012, Adam, did
not pay dividends to us. . We intend to hold all the stock, long term. We
have no voting rights. Fair Value of the stock at the end of the year was $
220.00 per share
3. We purchased 5,000 shares of Intel stock of Intel for $ 10.00 per
share, on June 1, 2012. We intend to sell the entire proceeds within the
next twelve months. The stock was worth $ 8.00 per share on December
31, 2012.
We have debt coming due in the amount of $ 5,000,000 at the end of
2012. The company intends to refinance $4, 750,000 of this debt to a
long term basis. The balance sheet was issued on April 1, 2013. The
company completed and had an agreement in place with the bank prior to
the issuance of the financial statements. The new debt is payable in
installments, beginning in 2015 in the amount of $ 1,200,000 per year.
The interest rate is a variable interest rate, but can run no higher than 5%
over the course of the agreement.
__________________
Lucille
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Topic: Notes to Financial Statements
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