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Intermediate Accounting II (QUIZ)-During 2014, PVP Co. introduced a new product carrying a two-year warranty..




Question;1. During 2014, PVP Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 3% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2014 and 2015 are as follows:Actual WarrantySalesExpenditures2014 $ 900,000 $10,0002015 1,000,000 30,000$1,900,000 $40,000Show computation for an estimated warranty liability on 12/31/2015..2. To increase its sales, PVP Co. included a coupon redeemable for a prize in each package of cereal sold beginning on July 1, 2014. Each prize costs PVP $1.00, and five coupons must be presented to receive a prize. PVP estimated that only 50% of the coupons issued would be redeemed. For the six months ended December 31, 2014 the following information is available:Packages of cereal soldPrizes purchasedCoupons redeemed2,000,000150,000500,000Show computations for the estimated liability for prize claims outstanding on December 31, 2014.3. On January 2, 2014, PVP Co. issued 6 % bonds with a face value of $400,000 when the market interest rate was 8 %. The bonds are due in 10 years, and interest is payable every June 30 and December 31. Use the following present value and present value annuity tables to select applicable factors.Present value of an ordinary annuity of $1At 3% 10 periods=8.5302At 4% 20 periods=13.5903At 6% 10 periods=7.3601At 8% 10 periods=6.7101Present value of $1At 3% 10 periods=0.7441At 4% 20 periods=0.4564At 6% 10 periods=0.5584At 8% 10 periods=0.4632Show computations to calculate the selling price of the bond (round your final answer to the nearest dollar).4. On January 1, 2014, PVP Corporation had 1,000,000 shares of common stock outstanding. On March 1, the corporation issued 150,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 600,000 of its own outstanding shares and retired them. Compute the weighted average number of shares to be used in computing earnings per share for 2014.5. On January 1, 2014, VAP Co issued at par $15,000 of its 5% bonds, convertible into 1,000 shares of VAP Co common stock. No bonds were converted during 2014.Throughout 2014, VAP Co had 1,500 shares of common stock outstanding. The net income for 2014 was $18, 000. VAP Co tax rate is 35%.No potentially dilutive securities other than the convertible bonds were outstanding during 2014. Show calculations to determine VAP Co diluted earnings per share for 2014.


Paper#37805 | Written in 18-Jul-2015

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