29 Jun Question 1. January 2: Mr. Burns opened up his
Question
1. January 2: Mr. Burns opened up his new company and dissolved the old one. The balances of the accounts (with the exception of fixed assets and uncollectible) were transferred over from the old business. Mr. Burns decided that he needed to invest more money into the business in order to get operational. Mr. Burns invested $1,000,000 into his business.
2. January 3: Mr. Burns bought a cookie making machine for $300,000 from Cookie Makers on account. The machine has a life of 10 years and a salvage value of $20,000. The machine will use the double decline depreciation method.
3. January 4: Mr. Burns bought an oven from the Try-N-Save. He took out a note for five months at an interest rate of 8%. The amount of the note was $300,000. The oven has a useful life of 5 years and will use the straight line method of depreciation. The expected salvage value of the oven at the end of its useful life is $50,000.
4. January 15: Mr. Burns bought cookie dough to make his cookies. Mr. Burns paid $220,000 for the cookie dough.
5. January 17: Mr. Burns earned the rest of his unearned rent revenue of $281,250 from last year from his nuclear power plant.
6. February 6: After promising to change his evil ways, Lisa Simpson agrees to help Mr. Burns sell his cookies. Lisa sells some cookies to Old Folks Home for $110,000 on account. The cost of selling the cookies was $60,000. For prompt payment, Mr. Burns offered the discount of 2/10, n30.
7. February 20: Mr. Burns sold his delicious cookies to candy store on account $200,000. Mr. Burns offered terms 2/20, n30. The cost of merchandise sold was $100,000.
8. February 28: Mr. Burns bought a new vehicle so he could sell more cookies. Mr. Burns paid $20,000 dollars for the truck. The truck was not expected to have salvage value. Mr. Burns decided to depreciate the truck by the miles. Each mile driven would depreciate the truck by $.20.
9. February 28: Mr. Burns collected cash from Homer Simpson of $22,000. The note receivable was signed last December 15. He collected the face value of the note, $15,000 plus the interest receivable recorded last year. Since Homer allowed Lisa to work for him, he decided only to collect the interest accrued last year and not the interest for January and February.
10. March 5: Mr. Burns bought more cookie dough (inventory) to continue to make his cookies. He bought $600,000 worth of inventory. There was also a $20,000 freight charge. The terms of the shipping agreement was FOB shipping. Mr. Burns paid for the whole amount.
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