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1.) Motown Corporation has the following information;Par value of bonds $ 400,000;Stated Interest rate 8%;Effective Interest rate 10%;Purchased for $ 369,112;Purchased on 1/1/X2;Mature on 1/1/X7;Interest paid semi-annually on July 1;AND January 1;Bonds were purchased with the ability and intent to hold to maturity.;The entry to record the purchase of the bonds is as follows;A. Debit the Held to Maturity Securities account and credit cash for $185,280;B. Debit the Held to Maturity Securities account and credit cash for $170,973;C. Debit the Held to Maturity Securities account and credit cash for $369,112;D. Debit the Held to Maturity Securities account and credit cash for $400,000;E. Debit the Held to Maturity Securities account and credit cash for $154,200Page 3;2.) Motown Corporation has the following information;Par value of bonds $ 300,000;Stated Interest rate 8%;Effective Interest rate 10%;Purchased for $ 276,834;Purchased on 1/1/X2;Mature on 1/1/X7;Interest paid semi-annually on July 1;AND January 1;Carrying value at 12/31/X2 $ 280,610;Fair value at 12/31/X2 $ 285,000;The bonds are available for sale.;The journal entry required on 12/31/X2 is as follows;A. Debit Securities Fair Value Adjustment ? Available for Sale and credit Gain on Available for Sale Bonds for $15,000.;B. Debit Securities Fair Value Adjustment ? Available for Sale and credit Gain on Available for Sale Bonds for $4,390;C. Debit Securities Fair Value Adjustment ? Available for Sale and credit Unrealized Holding Gain on Bonds for $4,390;D. Debit Securities Fair Value Adjustment ? Available for Sale and credit Unrealized Holding Gain on Bonds for $8,166.;E. Debit Available For Sale Securities and credit Unrealized Holding Gain on Bonds for $8,166.Page 4;Use the following information for # 3 - 6;Cost Fair Value;$400,000 of 10% bonds $ 356,000 $ 406,000;$100,000 of 8% bonds $ 100,000 $ 99,500;$300,000 of 12% bonds $ 302,000 $ 282,000;Previous Sec. FV Adj. $ - $ -;Totals $ 758,000 $ 787,500;3.) The total amount to go through current year income with regard to these securities is;A. None the amount of gain/(loss) is a separate component of stockholder?s equity;B. Gain of $50,000;C. Loss of $20,500;D. Gain of $29,500;E. Loss of $12,500;4.) The entry to record the above information is as follow;A. Debit Unrealized Holding Gain or Loss on Bonds account and credit Securities Fair Value Adjustment ? Trading Securities.;B. Debit Securities Fair Value Adjustment ? Trading Securities account and credit Unrealized Holding Gain or Loss on Bonds.;C. Debit Unrealized Holding Gain or Loss on Bonds account and credit Cash.;D. Debit Securities Fair Value Adjustment ? Trading Securities account and credit Cash.;Motown Corporation holds the following trading securities on 12/31/X2. Assume that there was no previous adjustment to the;Securities Fair Value account;InvestmentPage 5;5.) The impact of the above entry on the asset side of the balance sheet is as follows;A. No impact;B. Increase;C. Decrease;6.) The unrealized gain or loss on the $400,000 10% bonds is;A. Loss of $44,000;B. Gain of $6,000;C. Gain of $50,000;D. Loss of $50,000;E. Gain of $44,000;Use the following additional information for #7 - 9;Fair Value Fair Value;Cost at 12/31/X2 at 12/31/X3;$400,000 of 10% bonds $ 356,000 $ 310,000 $ 342,000;$100,000 of 8% bonds $ 100,000 $ 100,000 $ 109,000;$300,000 of 12% bonds $ 302,000 $ 220,000 $ 313,000;Previous Sec. FV Adj. $ - $ -;Totals $ 758,000 $ 630,000;7.) The current year unrealized gain or loss from the $300,000 12% bonds is;A. Gain of $ 13,000;B. Loss of $ 46,000;C. Gain of $ 46,000;D. Gain of $ 93,000;E. Loss of $ 13,000;Motown Corporation holds the following trading securities on 12/31/X3. Assume that all previous adjustments to the Securities Fair;Value account were made as necessary;InvestmentPage 6;8.) The net gain or loss on the change in value of all securities from 12/31/X2 to 12/31/X3 is;A. Loss of $ 6,000;B. Gain of $ 93,000;C. Gain of $ 9,000;D. Gain of $ 134,000;E. Loss of $ 128,000;9.) The total amount to go through current year income with regard to these securities is as follows;A. Loss of $ 128,000;B. Gain of $ 6,000;C. Gain of $ 128,000;D. Gain of $ 134,000;E. Loss of $ 6,000Page 7;Use the following information for #10 ? 14;The following information is available for the Motown Corporation;Motown Purchases 25% of the total shares of Max Corp;Purchased on 1/1/X5;# shares Max Corp outstanding 80,000;Par value per share $ 10;Fair market value per share $ 10;The book value of Max Corp. $ 800,000;Motown has significant influence of the Max Corp.;10.) The original entry for the acquisition of the stock on 1/1/X5 is as follows;A. No entry required;B. Debit Cash and credit Investment in Max Corporation (income statement account) for $200,000;C. Debit Investment in Max Corporation (income statement account) and credit Cash for $200,000;D. Debit Investment in Max Corporation (balance sheet account) and credit Cash for $25,000;E. Debit Investment in Max Corporation (balance sheet account) and credit Cash for $200,000;11.) The entry required on Motown?s books at 12/31/X5 is as follows;Net loss of is reported by Max Corp. for year end 12/31/X5 $ (40,000);A. Debit Cash and credit Investment in Max Corporation (income statement account) for $10,000;B.;C.;D.;E. No entry required;Debit Loss from Investment in Max Corporation (income statement account) and credit Investment in Max Corporation (balance sheet;account) for $40,000;Debit Loss from Investment in Max Corporation (income statement account) and credit Investment in Max Corporation (balance sheet;account) for $10,000;Debit Loss from Investment in Max Corporation (balance sheet account) and credit Investment in Max Corporation (income statement;account) for $10,000Page 8;12.) The entry required on Motown?s books at 6/1/X6 is as follows;Cash dividend paid by Max Corp on 6/1/X6 $ 200,000;A. No entry required.;B. Debit Cash and credit Investment In Max Corporation (balance sheet account) for $50,000;C. Debit Cash and credit Investment in Max Corporation (balance sheet account) for $200,000;D. Debit Investment in Max Corporation (income statement account) and credit Cash for $50,000;E. Debit Retained Earnings and credit Investment in Max Corporation (balance sheet account) for $50,000;13.) The entry required on Motown?s books at 12/31/X6 affects the stockholder?s equity section of the balance sheet as follows;Net income of is reported by Max Corp. for year end 12/31/X6 $ 68,000;A. No impact on stockholder's equity;B. Increase of $ 68,000;C. Decrease of $ 68,000;D. Increase of $ 17,000;E. Decrease of $ 17,000Page 9;14.) On 12/31/X6 the fair value of Max Corporation?s stock is $15 per share. The entry required on Motown?s books is as follows;A.;B.;C.;D.;E. No entry required.;Use the following information for #15 - 19;Motown Corporation has the following information;Par value of bonds $ 400,000;Stated Interest rate 8%;Effective Interest rate 10%;Purchased for $ 369,112;Purchased on 1/1/X2;Mature on 1/1/X7;Interest paid semi-annually on July 1;AND January 1;The bonds are purchased with the intent and ability to hold to maturity;15.) What is the bond discount amortization amount for the 7/1/X2 payment?;A. $ 2,578;B. $ 18,456;C. $ 2,456;D. $ 371,568;Debit Investment in Max Corporation (balance sheet account) and credit Gain from Investment in Max Corporation (income statement;account) for $300,000;Debit Investment in Max Corporation (balance sheet account) and credit Gain from Investment in Max Corporation (stockholder?s equity;account) for $300,000;Debit investment in Max Corporation (balance sheet account) and credit Gain from Investment in Max Corporation (stockholder?s equity;account) for $100,000;Debit investment in Max Corporation (balance sheet account) and credit Gain from Investment in Max Corporation (income statement;account) for $100,000Page 10;16.) What is the carrying value of the bonds at 1/1/X2?;A. $ 379,425;B. $ 400,000;C. $ 369,112;D. $ 379,696;17.) What is the carrying value of the bonds at 12/31/X3?;A. $ 379,425;B. $ 369,112;C. $ 400,000;D. zero;E. $ 379,696;18.) The entry to record the interest payment on 7/1/X2 is as follows;A. Debit Cash for $18,456, credit Held to Maturity Securities for $4,912 and credit Interest Revenue for $16,000;B. Debit Cash for $32,000, debit Held to Maturity Securities for $4,912 and credit Interest Revenue for $36,912;C. Debit Cash for $16,000, debit Held to Maturity Securities for $2,456 and credit Interest Revenue for $18,456Page 11;19.) The impact on total stockholder?s equity of the entry required on 7/1/X2 is;A. No impact on stockholder's equity;B. Decrease of $ 16,000;C. Increase of $ 18,456;D. Decrease of $ 18,456;E. Increase of $ 2,456;20.) Motown Corporation has the following information;Par value of bonds $ 200,000;Stated Interest rate 8%;Effective Interest rate 10%;Purchased for $ 184,556;Purchased on 1/1/X2;Sold on 7/1/X3;Sold for 97%;Interest paid semi-annually on July 1;AND January 1;The bonds are purchased with the intent and ability to hold to maturity;The impact on retained earnings for the entry required upon the sale of the bonds is;A. No impact on retained earnings as amount of gain/(loss) is shown as a separate component of stockholder?s equity.;B. Increase of $ 5,573;C. Decrease of $ 5,573;D. Increase of $ 188,427;E. Decrease of $ 188,427

 

Paper#74831 | Written in 18-Jul-2015

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