Semester Case – Cowboy Ice Cream, Inc. (CIC)
Last class period we discussed a possible expansion by CIC whereby they would purchase a building, land, and new equipment. In order to finance such an expansion CIC would borrow $800,000. CIC is currently considering possible options for this borrowing.Prepare amortization schedules for each of the following, rounding all computations to the nearest whole dollar. Assume 8% interest applies to each option and all borrowings would originate on January 1, 2019.
Option #1:
Issue a note with the principal and interest due in 18 months. Interest and principal are payable in cash on June 30, 2020.
Option #2
Issue a note with the principal due in 5 years with interest payable annually on December 31.
Option #3
Issue a note to repay $160,000 of the principal due each year on December 31 for 5 years along with the annual interest due.
Option #4
Issue a note to make equal annual payments of $200,365 each year on December 31 for 5 years.
Option #1
Year
Pmt #
Balance January 1
Total Cash Paid
Interest Expense
Principal Reduction
Balance December 31
2019
1
$800,000
2020
2
2021
3
2022
4
2023
5
Option #2
Year
Pmt #
Balance January 1
Total Cash Paid
Interest Expense
Principal Reduction
Balance December 31
2019
1
$800,000
2020
2
2021
3
2022
4
2023
5
Option #3
Year
Pmt #
Balance January 1
Total Cash Paid
Interest Expense
Principal Reduction
Balance December 31
2019
1
$800,000
2020
2
2021
3
2022
4
2023
5
Option #4
Year
Pmt #
Balance January 1
Total Cash Paid
Interest Expense
Principal Reduction
Balance December 31
2019
1
$800,000
2020
2
2021
3
2022
4
2023
5
As a condition of the borrowings described above, CIC will be required to provide financial statements, including a classified balance sheet, to the lender. W.T. would like to see a pro forma balance sheet if a borrowing is undertaken.
The account balances for December 31, 2018 for CIC are presented below. Only one additional adjustment is required. On January 31, 2018, CIC sold a parcel of land and received in return cash and a note receivable of $10,000, due January 31, 2019. The note carries interest at the rate of 8%, but interest has not been recorded for the current year. Record this adjustment by updating the accounting equation presented below.
Assume that CIC opts to borrow $800,000 under Option #2 presented above. Assume the borrowing takes place on January 1, 2019 as planned and no further transactions occur on that day. Add that transaction to the accounting equation below and then prepare a classified balance sheet for CIC for January 1, 2019.
Item
Cash
Accts Rec
Inven-tory
Note Rec
Truck
AccumDepr
Accts
Pay
Com
Stock
Ret Earn
Bal
76,000
12,000
6,500
10,000
50,000
8,250
3,750
75,000
67,500
Adj Int
Bal 12/31
Borrow
Bal 1/1
Cowboy Ice Cream, Inc.
Balance Sheet
January 1, 2019
ASSETS
LIABILITIES
Current Assets:
Current Liabilities:
Total Current Liabilities
Long-term Liabilities
Total Long-term Liabilities
Total Current Assets
Total Liabilities
Long-term Assets
STOCKHOLDERS’ EQUITY:
Total Long-term Assets
Total Stockholders’ Equity
Total Assets
Total Liabilities & Stockholders’ Equity
Additional Example
On August 1, 2018 a company borrows $25,000 by signing a two-year note. The note has an 8% annual interest rate and matures on August 1, 2020. Interest and principal are paid in cash on the maturity date.
Record all the transactions related to this loan.
Transactions
Balance Sheet
Income Statement
Cash Flow
Assets
Liabilities
Equity
Cash
Interest Payable
Note Payable
Retained Earnings
Rev
Exp
Net Income
Type
Amount
Balance on 7/1/18
$ 5,000
$ 5,000
8/1/18 – Borrow money
12/31/18 – Adjusting entry
12/31/19 – Adjusting entry
8/1/20 – Pay principal
8/1/20 – Pay interest
Balance on 8/31/20
Net Change in Cash
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Our Services
Custom Writings Help is a Quality-Oriented Company in Online Writing as a result of hiring exceptional professionals to execute clients' tasks.
Essays
At Custom Writings Help,We understand the struggle of research paper writing, and that is why at Custom WritingS Help, we are all out to help you. We pride ourselves on having a team of clinical writers. The stringent and rigorous vetting process ensures that only the 'BEST' Writers are chosen for the job. We have highly qualified Ph.D. and MA writers working with us; we equally offer these experienced writers specific bonuses and incentives to make them deliver highly original, unique, and informative content at reasonably low prices.
Admissions
Thesis Writing Service
Worlwide, Many Masters Students are struggling with Thesis Completion. A thesis is likely to be the longest and most challenging piece of work a student has ever completed. However, unlike essays and other assignments, a student can pick a particular interest topic and work on their initiative. Fortunately, we are there for you. At Custom Writings Help, you are assured of an authentic, imaginative, informative, linguistically great, and advantageous thesis that adheres to all your needs. So, why continue considering different writers when you have discovered the best in the field?
Editing
Custom Papers
Not a single student can avoid writing custom papers. However, a total lack of experience, skills, and time makes it very hard to produce a superb writing piece. Therefore, if you are seeking professional help, turn to us. Our specialized and experienced writers compose a variety of model papers, including custom essays, college term papers, research papers, book reports, MBA essays, executive summaries, dissertations, Ph.D. theses, admission essays, and research proposals for college and university students at any level.
Coursework
Essay Writing
Most of the students disregard the critical principles of essay writing and compose papers below sensible guidelines. Therefore, with Custom Writings Help, one should not worry about his/her essay. Our Writers compose informative and engaging content on all complexities and topics. We write meaningful and smart essays while prioritizing all aspects that bring about a good grade, such as impeccable grammar, proper structure, zero-plagiarism, and conformance to guidelines.
Coursework
Coourse Work Writing
Don't let the seemingly never-ending onslaught of writing assignments get you down. If you are looking where to get course work assistance online, the writers at Custom Writings Help are here to assist you with all of your writing needs. We undertake to unique delivery of papers that meet the professor's requirements. The content is proofread, edited, and checked plagiarism before submission to customers. No matter how big or small your work is, we will deliver on time. Try US Now! !
Coursework
Dissertation Writing Service
High-Quality Dissertation Writing Services are rare. They require Ph.D. academicians – not easily found. However, are an exception. The years, time, and resources we have invested in the dissertation world has given us a competitive advantage over others. Choose to come to Custom Writings Help; You will find perfect Ph.D. consultants who have written hundreds of dissertations theses ready to help you. Let our dissertation-writing services help you craft your dissertation, for you are assured we will give you the results.