1. Stuttgart Manufacturing Company requires 10 coupons from its soap powder, Uberschocken, to be redeemed along with $1.00 for a stain remover sprayer. Each box contains one coupon. This year 1,000,000 boxes of soap powder were sold at $5.25 per box, again each containing a coupon. They purchased 75,000 stain sprayers for cash at $2.10 each during the current year. They estimate that 70% of the coupons will be returned from sales this year. Only 550,000 coupons actually were returned in the current year.

Dr. Cr.

1. Record the purchase of the stain sprayers assuming cash was paid.

1. Calculate the premium expense for the current year.

1. Record the entire premium expense for the year, both redemption and accrual.

2. Dresden Company issued a 6% per year semi-annual interest bond to yield 5% per year. The bond is a 10 year bond with a face value of $1,000,000 and pays interest every January 1 and July 1. In addition, bond issue costs were $45,000. The bond is callable after one year at 108. Dresden uses the effective interest method of amortization. The bond was issued January 1, 2015.

Determine the proceeds from the bond issue using the tables provided in Chapter 6.

Record the issue of the bond and the bond issue costs.

Dr. Cr.

Prepare an amortization table through January 1, 2017.

Record the necessary accrual entries on December 31, 2016, their year end.

Assume that on January 1, 2017 the entire bond was called back at 108 and extinguished. Prepare the debt extinguishment entry.

1. Frankfurt Company has a 5 year $1,000,000, 5% note payable to Deutsches Bank International. The note was issued at par and interest was paid regularly. On January 1, 2015, the date the note came due, Frankfurt notified the bank that they could not make the $1,000,000 payment. A restructuring deal was struck. The interest rate was reduced to 3% and the note extended to January 1, 2018 when $900,000 will be paid to complete the loan. The fair value of money is still 5%.

1. Record any restructuring of the loan on the books of Frankfurt Company.

1. Record the restructured loan on the books of Deutsches Bank International.

1. Augsburg Soup Company had the following issues at December 31, 2015. For each, determine what would have to be done for financial statements. If an entry is required, show the journal entry.

1. Augsburg was sued on December 1, 2015 for delivering bad soup which made customers ill. The attorneys have met and decided it is probable that Augsburg Company will lose somewhere between $1,800,000 and $2,700,000 in a settlement by mid 2016.

1. Augsburg lost its soup factory in Frogistan when the government there had a revolution and expropriated (stole) the factory. The loss of the factory amounting to $15,000,000 was recorded. The new government promises to compensate Augsburg, but it is not known when it will do so. If the new government fails to do so, then Cragganmore Insurance will pay an estimated sum minus a $400,000 deductible.

1. Augsburg is in a tax dispute with the Internal Revenue Service. They expect to win, although the IRS has billed them for $3,500,000.

1. Augsburg’s local factory was lost in a fire. The loss of $8,000,000 was recorded. At December 31, 2015, they are working with their insurance company to file a claim. The insurance company has a $100,000 deductible but is looking into an issue of the fire being caused by lack of maintenance of equipment on the part of Augsburg.

1. Augsburg also sells commercial restaurant soup making equipment. Warranties for three years were sold for $300,000 during 2015. Total expected costs for warranties are $180,000. This year, 2015, $60,000was paid in honoring warranties. Augsburg uses percent of costs to recognize revenue. Journalize the revenue recognition.

1. Rotterhosen Company has 100 employees. A summary of their employees is as follows:

Current Payroll (gross)

70 employees whose salaries are less than $118,000 to date but more
than $7,000 to date $400,000
20 employees whose salaries are in excess of $118,000 to date 70,000
10 new employees who salaries are yet to exceed $7,000 to date 10,000 $480,000

Federal withholding taxes amount $61,000 while state withholding taxes are $8,000
Union dues was withheld amounting to $3,000. Social Security taxes are 6.2% on the first $118,000, and MediCare is 1.45%. The federal unemployment tax is .8% on the first $7,000 earned, and state unemployment is 6% on the first $7,000 earned. However, due to Rotterhosen’s little turnover of employees, they have been given a credit of 4.2%.

Record the Payroll Entry using Salaries Payable as the residual amount.

Record the employer’s payroll tax expense.

1. Schwartzwald Company estimates that its liability 8 years from now will be $3,000,000 to provide restoration of land it uses in its mining operation. Their financing rate is 8%.

Determine the amount of the Asset Recovery Obligation they must record today.

Answer rating: 100% (QA)

Stuttgart Manufacturing Company 1 Record the purchase of the stain sprayers assuming cash was paid Dr Stain Sprayers Asset 157500 75000 210 Cr Cash 157500 2 Calculate the premium expense for the curre... View the full answer