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general business data bank




Question;Ex. 186;On January 1, Focus Corporation issued $600,000, 12%;5-year bonds at face value. Interest is payable semiannually on July 1 and;January 1.;Instructions;Prepare journal entries to record the;(a) Issuance of the bonds.;(b) Payment of interest on July 1, assuming no;previous accrual of interest.;(c) Accrual of interest on December 31.;Ex. 187;The following section is taken from Blue Corp?s;balance sheet at December 31, 2011.;Current;liabilities;Interest;Payable............................................................ $ 90,000;Long-term;liabilities;Bonds;Payable, 9%, due January 1, 2016.................. 2,000,000;Interest is payable semiannually on;January 1 and July 1. The bonds are callable on any interest date.;Ex. 187 (Cont.);Instructions;(a) Journalize the payment of the;bond interest on January 1, 2012.;(b) Assume that on January 1, 2010, after;paying interest, Blue calls bonds having a face value of $800,000. The call;price is 106. Record the redemption of the bonds.;(c) Prepare the entry to record the;payment of interest on July 1, 2012, assuming no previous accrual of interest;on the remaining bonds.;Ex. 188;Niebuhr Company issued$500,000 of bonds on January 1, 2012.;Instructions;(a);Prepare;the journal entry to record the retirement of the bonds at maturity, assuming;the bonds were issued at 100.;(b);Prepare;the journal entry to record the retirement of the bonds before maturity at 97.;Assume the balance in Premium on Bonds Payable is $5,000.;(c);Prepare;the journal entry to record the conversion of the bonds into 15,000 shares of;$10 par value common stock. Assume the bonds were issued at par.;20,000;Solution 188 (Cont.);Ex. 189;Casey Company retired $500,000 face value, 9% bonds on;June 30, 2012 at 96. The carrying value of the bonds at the redemption date was;$508,000.;Instructions;Prepare the journal entry to record the redemption of the;bonds.;Ex. 190;Presented;below are three independent situations;(a) Strike;Corporation purchased $350,000 of its bonds on June 30, 2012, at 102 and;immediately retired them. The carrying value of the bonds on the retirement;date was $339,500. The bonds pay semiannual interest and the interest payment;due on June 30, 2012, has been made and recorded.;(b) Worton;Inc. purchased $400,000 of its bonds at 97 on June 30, 2012, and immediately;retired them. The carrying value of the bonds on the retirement date was;$393,000. The bonds pay semiannual interest and the interest payment due on;June 30, 2012, has been made and recorded.;(c) Mountain;Company has $80,000, 10%, 12-year convertible bonds outstanding. These bonds;were sold at face value and pay semiannual interest on June 30 and December 31;of each year. The bonds are convertible into 40 shares of Mountain $5 par value;common stock for each $1,000 par value bond. On December 31, 2012, after the;bond interest has been paid, $20,000 par value of bonds were converted. The;market value of Mountain?s common stock was $38 per share on December 31, 2012.;Instructions;For each of the independent situations, prepare;the journal entry to record the retirement or conversion of the bonds.;Ex. 191;Douglas Company;issued a $3,500,000, 10%, 10-year mortgage note payable to finance the;construction of a building at December 31, 2012. The terms provide for;semiannual installment payments of $200,608.;Instructions;Prepare the entry to record;(a) the mortgage loan on December 31, 2012.;(b) the first installment payment.;Ex. 192;Adams Corporation issues a $4,500,000, 12%;20-year mortgage note payable on December 31, 2012, to obtain needed financing;for the construction of a building addition. The terms provide for semiannual;installment payments of $309,409 on June 30 and December 31.;Ex. 192 (Cont.);Instructions;(a) Prepare;the journal entries to record the mortgage loan on December 31, 2012, and the;first installment payment.;(b) Will;the amount of principal reduction in the second installment payment be more or;less than with the first installment payment?;Ex. 193;Lucky Company borrowed $750,000 on January;1, 2012, by issuing $800,000, 8% mortgage note payable. The terms call for;semiannual installment payments of $60,000 on June 30 and December 31.;Instructions;(a) Prepare;the journal entries to record the mortgage loan and the first two installment;payments.;(b) Indicate the amount of mortgage note payable;to be reported as a current liability and as a long-term liability at December;31, 2012.;Long-term: $685,920 [($800,000 ? $28,000;? $29,120) ? $56,960];Ex. 194;Presented below are three different aircraft;lease transactions that occurred for Northwest Airways in 2012. All the leases;start on January 1, 2012. In no case does Northwest receive title to the;aircraft during or at the end of the lease period, nor is there a bargain;purchase option.;Lessor;Oxford;Insurance Goin Leasing Flagg Leasing;Type of property 747 Aircraft 727 Aircraft L-1011 Aircraft;Yearly rental $8,508,645 $6,357,660 $2,851,861;Lease term 15 years 15 years 20 years;Estimated economic life 25 years 25 years 25 years;Fair value of;leased;asset $79,200,000 $63,000,000 $32,000,000;Present value of lease;rental;payments $72,000,000 $54,000,000 $28,000,000;Instructions;(a) Which of;the above leases are operating leases and which are capital leases? Explain;your answer.;(b) How should the lease transaction with Oxford Insurance;be recorded in 2012?;(c) How should the lease transaction with Goin Leasing;be recorded in 2012?;Ex. 195;Echo Corporation;entered into the following transactions;1. On;January 1, 2012 Grant Car Rental leased a car to Echo Corporation for one year.;Terms of the operating lease call for monthly payments of $650.;2. On;January 1, 2012, Echo Corporation entered into an agreement to lease 20;machines from Weiss Corporation. The terms of the lease agreement require an;initial payment of $500,000 and then three annual rental payments of $600,000;beginning on December 31, 2012. The present value of the three rental payments;is $1,492,108. The lease is a capital lease.;Instructions;Prepare the appropriate journal entries;to be made by Echo Corporation in January related to the lease transactions.;Ex. 196;On January 1, 2012;Malcolm Inc. entered into an agreement to lease equipment from Finley;Corporation. The lease agreement requires five annual rental payments of;$90,000 beginning December 31, 2012. The present value of the rental payments;is $341,172. The lease transfers substantially all the benefits and risks of;ownership toMalcolm.;Instructions;Prepare the entry to record the lease agreement on the;books of Malcolm Inc. on January 1, 2012.;Ex. 197;The adjusted trial balance for Perry Corporation;at the end of 2012 contained the following accounts;Bonds;payable, 10%.............................................................. $700,000;Interest;payable..................................................................... 20,000;Discount;on bonds payable................................................... 40,000;Lease;liability.......................................................................... 50,000;Mortgage;notes payable, 9%, due 2015................................ 90,000;Accounts;payable.................................................................. 120,000;aEx. 197 (Cont.);Instructions;(a) Prepare the long-term liabilities section of;the balance sheet.;(b) Indicate the proper balance sheet;classification for the accounts listed above that do not belong in the;long-term liabilities section.;Ex. 198;Ranger Corporation reports the following amounts;in their 2012 financial statements;At;December 31, 2012 For the;Year 2012;Total;assets $2,000,000;Total;liabilities 1,130,000;Total;stockholders? equity?;Interest;expense $20,000;Income;tax expense 130,000;Net;income 150,000;Instructions;(a) Compute the December 31, 2012, balance in;stockholders? equity.;(b) Compute the debt to total assets ratio at;December 31, 2012.;(c) Compute;times interest earned for 2012.;aEx. 199;Boxer Corporation is issuing $600,000 of 8%, 5-year bonds when;potential bond investors want a return of 10%. Interest is payable;semiannually. The present value of 1 factors are 4%,.67556 and 5%,.61391. The;present value of an annuity factors are 4%, 8.1109 and 5%, 7.72173.;Instructions;Compute the market price (present;value) of the bonds.;aEx. 200;On January 1, 2012, Plank Corporation;issued $800,000, 9%, 5-year bonds for $769,112. The bonds were sold to yield an;effective-interest rate of 10%. Interest is paid semiannually on June 30 and;December 31. The company uses the effective-interest method of amortization.;Instructions;(a) Prepare a bond discount;amortization schedule which shows the amortization of discount for the first;two interest payment dates. (Round to the nearest dollar.);(b) Prepare;the journal entries thatPlank Corporation would make on January 1, June 30, and December 31, 2012;related to the bond issue.;aEx. 201;On June 30, 2012, Upton, Inc. sold $3,000,000;(face value) of bonds. The bonds are dated June 30, 2012, pay interest;semiannually on December 31 and June 30, and will mature on June 30, 2015. The;following schedule was prepared by the accountant for 2012.;Semi-Annual Interest;to Interest Unamortized Bond;Interest Period be Paid Expense Amortization;Amount Carrying Value;$75,000 $2,925,000;1 $120,000 $131,625 $11,625 63,375 1,936,625;Instructions;On the basis of the above information, answer the;following questions. (Round your answer to the nearest dollar or percent.);1. What;is the stated interest rate for this bond issue?;2. What;is the market interest rate for this bond issue?;3. What;was the selling price of the bonds as a percentage of the face value?;4. Prepare;the journal entry to record the sale of the bond issue on June 30, 2012.;5. Prepare;the journal entry to record the payment of interest and amortization on;December 31, 2012.;aEx. 202;On January 1, 2012, Sunrise Corporation issued;$4,000,000, 9%, 5-year bonds dated January 1, 2012, at 94. The bonds pay;semiannual interest on January 1 and July 1. The company uses the straight-line;method of amortization and has a calendar year end.;Instructions;Prepare all the journal entries that Sunrise;Corporation would make related to this bond issue through January 1, 2013. Be;sure to indicate the date on which the entries would be made.;aEx. 203;Venture Company issued $600,000, 10%, 20-year;bonds on January 1, 2012, at 103. Interest is payable semiannually on July 1;and January 1. Venture uses the straight-line method of amortization and has a;calendar year end.;Instructions;Prepare all;journal entries made in 2012 related to the bond issue.;aEx. 204;Magic Company issued $500,000, 10%, 10-year bonds;on December 31, 2012, for $460,000. Interest is payable semiannually on June 30;and December 31. Magic uses the straight-line method of amortization and has a;calendar year end.;Instructions;Prepare the;appropriate journal entries on;(a) December 31, 2012.;(b) June 30, 2013.


Paper#45017 | Written in 18-Jul-2015

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