Question;1)On January 1, 2010, Inea Fishery sold $650,000 (face amount) of bonds. The bonds are dated January 1, 2010 and will mature on January 1, 2025. Interest is paid annually on June 30 and December 31. The bonds are callable after December 31, 2012 at 101. The following partial amortization schedule was prepared by the accountant for the first 2 years of the life of the bonds:Carrying ValueDate Cash Interest Amort. of BondsPayment Expense6/30/2010 32500 30496 -2004 76039412/31/2010 32500 30416 -2084 7583106/30/2011 32500 30332 -2168 75614212/31/2011 32500 30246 -2254 753888Required:On the basis of the information above, answer the following questions (round your answers to the nearest dollar or percent). For complete credit you must show your calculations:(a) What is the nominal or stated rate of interest for this bond issue?(b) What is the effective or market rate of interest for this bond issue?(c) Complete the schedule above for the years 2012 through 2025.(d) Present the journal entry to record the sale of the bond issue.(e) Present the appropriate entry(ies) at December 31, 2012(f) On June 30, 2013, $250,000 of the bond issue was redeemed at the call price. Present the journal entry for this redemption.(g) The remainder of the bond issue was allowed to mature. Present the journal entry on January 1, 2025 to record this maturity.2)Part A: Dyke Company's net incomes for the past three years are presented below:2014 2013 2012 $480,000 $450,000 $360,000During the 2014 year-end audit, the following items come to your attention:1. Dyke bought equipment on January 1, 2011 for $294,000 with a $29,000 estimated salvage value and a five-year life. The company debited an expense account and credited cash on the purchase date for the entire cost of the asset. (Straight-line method)2. During 2014, Dyke changed from the straight-line method of depreciating its cement plant to the double-declining balance method. The following computations present depreciation on both bases:2014 2013 2012 Straight-line 36,000 36,000 36,000Double-declining 46,080 57,600 72,000The net income for 2014 was computed using the double-declining balance method, on the January 1, 2014 book value, over the useful life remaining at that time. The depreciation recorded in 2014 was $72,000.3. Dyke, in reviewing its provision for uncollectibles during 2014, has determined that 1.5% is the appropriate amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2013 and 2014 when the expense had been $18,000 and $12,000, respectively. The company recorded bad debt expense under the new rate for 2014. The company would have recorded $6,000 less of bad debt expense on December 31, 2014 under the old rate.Instructions(a) Prepare in general journal form the entry necessary to correct the books for the transaction in part 1 of this problem, assuming that the books have not been closed for the current year.(b) Compute the net income to be reported each year 2012 through 2014.(c) Assume that the beginning retained earnings balance (unadjusted) for 2012 was $1,260,000. At what adjusted amount should this beginning retained earnings balance for 2012 be stated, assuming that comparative financial statements were prepared?(d) Assume that the beginning retained earnings balance (unadjusted) for 2014 is $1,800,000 and that non-comparative financial statements are prepared. At what adjusted amount should this beginning retained earnings balance be stated?Part B:Show how the following independent errors will affect net income on the Income Statement and the stockholders' equity section of the Balance Sheet using the symbol + (plus) for overstated, ? (minus) for understated, and 0 (zero) for no effect.2012 2013 Income Balance Income BalanceStatement Sheet Statement Sheet 1. Ending inventory in 2012 overstated.2. Failed to accrue 2012 interest revenue.3. A capital expenditure for factoryequipment (useful life, 5 years)was erroneously charged tomaintenance expense in 2012.4. Failed to count office supplies onhand at 12/31/12. Cash expenditureshave been charged to a supplies expenseaccount during the year 2012.5. Failed to accrue 2012 wages.6. Ending inventory in 2012 understated.7. Overstated 2012 depreciation expense, 2013 expense correct.
Paper#42682 | Written in 18-Jul-2015Price : $22