I am just wanted more information on the 1000 other expsense. Is it tied to a pa
ID: 2589581 • Letter: I
Question
I am just wanted more information on the 1000 other expsense. Is it tied to a particular item on the B/S? 250 common stock shares x $10 would need another 1k but the 1k is operating not financing? Please elaborate on this. Thanks
Dividends declared and paid totaled $700.
On January 1, 2013, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion.
Long-term nonmarketable investments that cost $1,600 were sold for $2,300.
The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the year.
Equipment with a cost of $2,000 and a book value of $300 was sold for $100. The company uses one Accumulated Depreciation account for all depreciable assets.
Equipment was purchased at a cost of $16,200.
The 12% bonds payable were issued on August 31, 2013, at 97. They mature on August 31, 2023. The company uses the straight-line method to amortize the discount.
Taxable income was less than pretax accounting income, resulting in a $396 increase in deferred taxes payable.
Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by $300 to a $3,800 fair value at year-end by adjusting the related allowance account.
Account Balances January 1 2013 December 31 2013 Debits S 1,400 2,800 1,700 500 8,100 1,300 7,000 15,000 Cash Accounts Receivable (net) Marketable Securities (at cost Allowance for Change in Value S 2,400 2,690 3.000 800 7,910 1,710 5,400 15,000 46,200 Prepaid Items Investments (ong-term) Buildings and Equipment Discount on Bonds Payable 5,400 Credits $16,400 4,150 2,504 650 400 Accumulated Depreciation Accounts Payable Income Taxes Payabke Wages Payable Interest Payable Note Payable (long-tem) 12% Bonds Payable Deferred Taxes Payabke Convertible Prefemed Stock, $100 par Common Stock, $10par Additional Paid-in Capital Unrealized Increase in Value of Marketable Securities Retained Eamings $16,000 3,800 2,400 1,100 3,500 10,000 1,196 800 9,000 14,000 8,700 500 10,000 9,800 21,500 13,700 800 14,100 85,400 Additional information for the year: a. Sales Cost of goods sold Depreciation expense Wages expense Other operating expenses Bond interest expense Dividend revenue Gain on sale of investments Loss on sale of equipment Income tax expense Net income $39,930 (19,890 (2,100) (11,000 (1,000) (410 820 700 (200) 4,800Explanation / Answer
$1,000 is an operating expense of the business, it is not related to any Balance Sheet item.
As this is an operating expense, will be classified as operting activity and not a financing activity.
For financing activity, dividend paid will be classified which is $700.
You can find this amount in the net changes of Retained Earning which is calculated as follows:
Opening Rentained Earning + Profit for the year - Dividend Paid = Closing Retained Earnings
= $10,000 + $4,800 - $700 = $14,100
The point about share capital is not related to any way with $1,000 of other operating expenses. It is a normal business expenditure.
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