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Accounting 23rd Edition Jonathan E. Duchac, James M. Reeve, Carl S. Warren - Solutions
Porto Bay Corporation manufactures and distributes leisure clothing. Selected transactions completed by Porto Bay during the current fiscal year are as follows:Jan. 10. Split the common stock 4 for 1 and reduced the par from $100 to $25 per share. After the split, there were 500,000 common shares
Lone Star Theatre Inc. owns and operates movie theaters throughout Arizona and Texas. Lone Star Theatre has declared the following annual dividends over a six-year period: 2005, $7,500; 2006, $9,000; 2007, $30,000; 2008, $30,000; 2009, $40,000; and 2010, $48,500. During the entire period ending
On February 28 of the current year, the following accounts and their balances appear in the ledger of Wild Things Corp., a meat processor: At the annual stockholders' meeting on April 2, the board of directors presented a plan for modernizing and expanding plant operations at a cost of
The following selected accounts appear in the ledger of Okie Environmental Corporation on August 1, 2010, the beginning of the current fiscal year: During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows:(a) Issued
Selected transactions completed by Kearny Boating Corporation during the current fiscal year are as follows:Jan. 8. Split the common stock 3 for 1 and reduced the par from $75 to $25 per share. After the split, there were 600,000 common shares outstanding.Feb. 13 Purchased 30,000 shares of the
Describe the two distinct obligations incurred by a corporation when issuing bonds.
Explain the meaning of each of the following terms as they relate to a bond issue:(a) Convertible, (b) Callable, and (c) Debenture.
A corporation issues $9,000,000 of 9% bonds to yield interest at the rate of 7%. (a) Was the amount of cash received from the sale of the bonds greater or less than $9,000,000? (b) Identify the following terms related to the bond issue: (1) Face amount, (2) Market or effective rate of interest, (3)
The following data relate to a $100,000,000, 12% bond issue for a selected semiannual interest period:Bond carrying amount at beginning of period $112,085,373Interest paid during period 6,000,000Interest expense allocable to period
Assume that Smith Co. amortizes premiums and discounts on bonds payable at the end of the year rather than when interest is paid. What accounts would be debited and credited to record (a) The amortization of a discount on bonds payable and (b) The amortization of a premium on bonds payable?
How would a bond payable be reported on the balance sheet if: (a) It is payable within one year and (b) It is payable beyond one year?
Folmar Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income.Determine the earnings per share of common stock, assuming income before bond interest and income tax is $800,000.
Simonelli Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income.Determine the earnings per share of common stock, assuming income before bond interest and income tax is$1,000,000.
Using the bond from Practice Exercise 14-2A, journalize the first interest payment and the amortization of the related bond discount.
Using the bond from Practice Exercise 14-2B, journalize the first interest payment and the amortization of the related bond discount.
A company issues a $5,000,000, 11%, five-year bond that pays semiannual interest of $275,000 ($5,000,000 × 11% × ½), receiving cash of $5,193,030. Journalize the bond issuance.
A company issues a $3,000,000, 12%, five-year bond that pays semiannual interest of $180,000 ($3,000,000 × 12% × ½), receiving cash of $3,146,200. Journalize the bond issuance.
Using the bond from Practice Exercise 14-4A, journalize the first interest payment and the amortization of the related bond premium.
Using the bond from Practice Exercise 14-4B, journalize the first interest payment and the amortization of the related bond premium.
A $500,000 bond issue on which there is an unamortized discount of $50,000 is redeemed for $475,000. Journalize the redemption of the bonds.
A $200,000 bond issue on which there is an unamortized premium of $15,000 is redeemed for $195,000. Journalize the redemption of the bonds.
On the first day of the fiscal year, a company issues $65,000, 10%, six-year installment notes that have annual payments of $14,924. The first note payment consists of $6,500 of interest and $8,424 of principal repayment.(a) Journalize the entry to record the issuance of the installment notes.(b)
On the first day of the fiscal year, a company issues $35,000, 12%, five-year installment notes that have annual payments of $9,709. The first note payment consists of $4,200 of interest and $5,509 of principal repayment.(a) Journalize the entry to record the issuance of the installment notes.(b)
Miller Co., which produces and sells skiing equipment, is financed as follows:Bonds payable, 10% (issued at face amount) $10,000,000Preferred $1 stock, $10 par 10,000,000Common stock, $25 par 10,000,000Income tax
Grodski Co. produces and distributes semiconductors for use by computer manufacturers. Grodski Co. issued $24,000,000 of 20-year, 10% bonds on April 1 of the current year, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to
On the first day of its fiscal year, Robbins Company issued $50,000,000 of five-year, 8% bonds to finance its operations of producing and selling home improvement products.Interest is payable semiannually. The bonds were issued at an effective interest rate of 11%, resulting in Robbins Company
Daan Corporation wholesales repair products to equipment manufacturers. On March 1, 2010, Daan Corporation issued $24,000,000 of five-year, 12% bonds at an effective interest rate of 10%, receiving cash of $25,853,146. Interest is payable semiannually on March 1 and September 1. Journalize the
Polders Corp., a wholesaler of office equipment, issued $16,000,000 of 20-year, 11% callable bonds on April 1, 2010, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the followingselected transactions:2010Apr. 1.
Vidovich Corp. produces and sells soccer equipment. To finance its operations, Vidovich Corp. issued $15,000,000 of 30-year, 14% callable bonds on January 1, 2010, with interest payable on January 1 and July 1. The fiscal year of the company is the calendar year.Journalize the entries to record the
On the first day of the fiscal year, Hammond Company obtained a $ 44,000, seven-year, 5% installment note from Vegas Bank. The note requires annual payments of $7,604, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $2,200 and principal
On January 1, 2010, Guiado Company obtained a $140,000, 10-year, 11% installment note from Best Bank. The note requires annual payments of $23,772, beginning on December 31, 2010. Journalize the entries to record the following:2010Jan. 1 Issued the notes for cash at their face amount.Dec. 31 Paid
Determine the present value of $400,000 to be received in three years, using an interest rate of 10%, compounded annually, as follows:(a) By successive divisions. (Round to the nearest dollar.)(b) By using the present value table in Exhibit 4.
Determine the present value of $100,000 to be received at the end of each of four years, using an interest rate of 6%, compounded annually, as follows:(a) By successive computations, using the present value table in Exhibit 4.(b) By using the present value table in Exhibit 5.
On January 1, 2010, you win $30,000,000 in the state lottery. The $30,000,000 prize will be paid in equal installments of $3,000,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31, 2010. If the current interest rate is 7%, determine the present value
Hi-Vis Co. produces and sells high resolution flat panel televisions. To finance its operations, Hi-Vis Co. issued $10,000,000 of five-year, 10% bonds with interest payable semiannually at an effective interest rate of 12%. Determine the present value of the bonds payable, using the present value
Mason Co. issued $60,000,000 of five-year, 14% bonds with interest payable semiannually, at an effective interest rate of 10%. Determine the present value of the bonds payable, using the present value tables in Exhibits 4 and 5. Round to the nearest dollar.
On the first day of its fiscal year, Simon Company issued $25,000,000 of 10-year, 10% bonds to finance its operations of producing and selling video equipment. Interest is payable semiannually. The bonds were issued at an effective interest rate of 13%, resulting in Simon Company receiving cash of
Gary Miller Corporation wholesales bike parts to bicycle manufacturers. On March 1, 2010, Gary Miller Corporation issued $8,000,000 of five-year, 14% bonds at an effective interest rate of 12%, receiving cash of $8,588,850. Interest is payable semiannually. Gary Miller Corporation’s fiscal year
Motocar Co. produces and sells automobile parts. On the first day of its fiscal year, Motocar Co. issued $15,000,000 of five-year, 15% bonds at an effective interest rate of 13%, with interest payable semiannually. Compute the following, presenting figures used in your computations.(a) The amount
Seward Co. produces and sells restaurant equipment. On the first day of its fiscal year, Seward Co. issued $40,000,000 of five-year, 11% bonds at an effective interest rate of 14%, with interest payable semiannually. Compute the following, presenting figures used in your computations.(a) The amount
The following data were taken from recent annual reports of Southwest Airlines, which operates a low-fare airline service to over 50 cities in the United States. (a) Determine the number of times interest charges were earned for the current and preceding years. Round to one decimal place(b) What
Three different plans for financing a $10,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.Instructions1. Determine for each plan the
On July 1, 2010, Brower Industries Inc. issued $32,000,000 of 10-year, 12% bonds at an effective interest rate of 13%, receiving cash of $30,237,139. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.Instructions1.
Maui Blends, Inc. produces and sells organically grown coffee. On July 1, 2010, Maui Blends, Inc. issued $3,000,000 of 15-year, 12% bonds at an effective interest rate of 10%, receiving cash of $3,461,181. Interest on the bonds is payable semiannually on December31 and June 30. The fiscal year of
The following transactions were completed by Hobson Inc., whose fiscal year is the calendar year:2010July 1. Issued $18,000,000 of five-year, 10% callable bonds dated July 1, 2010, at an effective rate of 12%, receiving cash of $16,675,184. Interest is payable semiannually on December 31 and June
On July 1, 2010, Brower Industries, Inc. issued $32,000,000 of 10-year, 12% bonds at an effective interest rate of 13%, receiving cash of $30,237,139. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.Instructions1.
Maui Blends, Inc. produces and sells organically grown coffee. On July 1, 2010, Maui Blends, Inc. issued $3,000,000 of 15-year, 12% bonds at an effective interest rate of 10%, receiving cash of $3,461,181. Interest on the bonds is payable semiannually on December31 and June 30. The fiscal year of
Three different plans for financing a $60,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.Instructionsa. Determine for each plan the
On July 1, 2010, Linux Corporation, a wholesaler of electronics equipment, issued $45,000,000 of 10-year, 10% bonds at an effective interest rate of 14%, receiving cash of $35,465,423. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the
Prosser Corporation produces and sells baseball cards. On July 1, 2010, Prosser Corporation issued $40,000,000 of 10-year, 12% bonds at an effective interest rate of 11%, receiving cash of $ 42,390,112. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the
For each of the following payroll-related taxes, indicate whether there is a ceiling on the annual earnings subject to the tax: (a) Federal income tax, (b) Medicare tax, (c) Social security tax,(d) Federal unemployment compensation tax.
For each of the following payroll-related taxes, indicate whether they generally apply to (a) Employees only, (b) Employers only, or (c) Both employees and employers:1. Federal income tax2. Medicare tax3. Social security tax4. Federal unemployment compensation tax5. State unemployment compensation
In a payroll system, what types of input data are referred to as(a) Constants(b) Variables?
To match revenues and expenses properly, should the expense for employee vacation pay be recorded in the period during which the vacation privilege is earned or during the period in which the vacation is taken? Discuss.
General Motors Corporation reported $10.1 billion of product warranties in the Current Liabilities section of a recent balance sheet. How would costs of repairing a defective product be recorded?
On September 1, Klondike Co. issued a 60-day note with a face amount of $100,000 to Arctic Apparel Co. for merchandise inventory.a. Determine the proceeds of the note, assuming the note carries an interest rate of 6%.b. Determine the proceeds of the note, assuming the note is discounted at 6%.
On February 1, Electronic Warehouse Co. issued a 45-day note with a face amount of $80,000 to Yamura Products Co. for cash.(a) Determine the proceeds of the note, assuming the note carries an interest rate of10%.(b) Determine the proceeds of the note, assuming the note is discounted at 10%.
Robert Clowney’s weekly gross earnings for the present week were $800. Clowney has one exemption. Using the wage bracket withholding table in Exhibit 3 with a $67 standard withholding allowance for each exemption, what is Clowney’s federal income tax withholding?
Robert Clowney’s weekly gross earnings for the week ending September 5 were $800, and his federal income tax withholding was $102.95. Prior to this week, Clowney had earned $24,000 for the year. Assuming the social security rate is 6% on the first $100,000 of annual earnings and Medicare is 1.5%
The payroll register of Salem Communications Co. indicates $29,580 of social security withheld and $7,650 of Medicare tax withheld on total salaries of $510,000 for the period. Retirement savings withheld from employee paychecks were $30,600 for the period. Federal withholding for the period
The payroll register of Salem Communications Co. indicates $29,580 of social security withheld and $7,650 of Medicare tax withheld on total salaries of $510,000 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $16,000, at the federal rate of 0.8% and
Blount Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $30,000 for the period. The pension plan requires a contribution to the plan administrator equal to 10% of employee salaries. Salaries were $400,000 during the
Hobson Equipment Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $20,000 for the period. The pension formula calculated a pension cost of $140,000. Only $106,000 was contributed to the pension plan administrator. Provide the
Akine Co. sold $600,000 of equipment during April under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On August 4, a customer required a $140 part replacement, plus $80 of labor under the warranty. Provide the journal entry for(a) The
Robin Industries sold $350,000 of consumer electronics during May under a nine-month warranty. The cost to repair defects under the warranty is estimated at 3% of the sales price. On July 16, a customer was given $140 cash under terms of the warranty. Provide the journal entry for (a) The estimated
I-Generation Co. sold 14,000 annual subscriptions of Climber’s World for $60 during December 2010. These new subscribers will receive monthly issues, beginning in January 2011. In addition, the business had taxable income of $400,000 during the first calendar quarter of 2011. The federal tax rate
U-Build It Warehouse issues a 45-day note for $800,000 to Thomson Home Furnishings Co. for merchandise inventory. Thomson Home Furnishings Co. discounts the note at 7%.a. Journalize U-Build It Warehouse’s entries to record:1. the issuance of the note.2. the payment of the note at maturity.b.
A borrower has two alternatives for a loan: (1) Issue a $240,000, 60-day, 8% note or (2) Issue a $240,000, 60-day note that the creditor discounts at 8%.(a) Calculate the amount of the interest expense for each option.(b) Determine the proceeds received by the borrower in each situation.(c) Which
A business issued a 30-day, 4% note for $60,000 to a creditor on account. Journalize the entries to record(a) The issuance of the note(b) The payment of the note at maturity, including interest.
A business issued a 60-day note for $45,000 to a creditor on account. The note was discounted at 6%. Journalize the entries to record(a) The issuance of the note(b) The payment of the note at maturity.
On June 30, Rioux Management Company purchased land for $400,000 and a building for $600,000, paying $500,000 cash and issuing a 6% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $25,000 on the principal plus the interest
P.F. Chang's China Bistro, Inc., the operator of P.F. Chang restaurants, reported the following information about its long-term debt in the notes to a recent financial statement: Long-term debt is comprised the following: (a) How much of the notes payable was disclosed as a current liability on
An employee earns $40 per hour and 1.75 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 6.0% (on earnings up
Reaves Professional Services has three employees?a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee: For the current pay period, the computer programmer worked 50 hours and the administrator worked 46 hours. The federal
In the following summary of data for a payroll period, some amounts have been intentionally omitted: (a) Calculate the amounts omitted in lines (1), (3), (8), and (12). (b) Journalize the entry to record the payroll accrual.(c) Journalize the entry to record the payment of the payroll.(d) From
According to a summary of the payroll of Scofield Industries Co., $600,000 was subject to the 6.0% social security tax and $740,000 was subject to the 1.5% Medicare tax. Also, $20,000 was subject to state and federal unemployment taxes.a. Calculate the employer’s payroll taxes, using the
The payroll register for Gentry Company for the week ended December 17 indicated the following:Salaries.....................................................$540,000Social security tax withheld........................25,380Medicare tax withheld...................................8,100Federal income
Thorup Company had gross wages of $200,000 during the week ended December 10. The amount of wages subject to social security tax was $180,000, while the amount of wages subject to federal and state unemployment taxes was $25,000. Tax rates are as follows:Social
Kailua Motors is a small manufacturer of specialty electric motors. The company employs 26 production workers and 7 administrative persons. The following procedures are used to process the company’s weekly payroll:a. All employees are required to record their hours worked by clocking in and out
The fiscal year for Grain-Crop Stores Inc. ends on June 30. In addition, the company computes and reports payroll taxes on a fiscal-year basis. Thus, it applies social security and FUTA maximum earnings limitations to the fiscal-year payroll.What is wrong with these procedures for accounting for
A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year’s vacation pay is $80,400. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record
Washington Co. operates a chain of bookstores. The company maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Hamilton Funds, by the fifteenth of the month following the end of each quarter. Assuming that the
In a recent year’s financial statements, Procter & Gamble showed an unfunded pension liability of $2,637 million and a periodic pension cost of $183 million. Explain the meaning of the $2,637 million unfunded pension liability and the $183 million periodic pension cost.
Lachgar Industries warrants its products for one year. The estimated product warranty is 4% of sales. Assume that sales were $210,000 for June. In July, a customer received warranty repairs requiring $140 of parts and $95 of labor.a. Journalize the adjusting entry required at June 30, the end of
Ford Motor Company disclosed estimated product warranty payable for comparative years as follows: Ford?s sales were $160,123 million in 2005 and increased to $176,896 million in 2006. Assume that the total paid on warranty claims during 2006 was $14,000 million. a. Why are short- and long-term
Several months ago, Welker Chemical Company experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $410,000. The company is contesting the fine. In addition, an employee is seeking $400,000 damages related to the spill.
Austin Technology Co. had the following current assets and liabilities for two comparative years: (a) Determine the quick ratio for December 31, 2010 and 2009.(b) Interpret the change in the quick ratio between the two balance sheetdates.
The current assets and current liabilities for Apple Computer, Inc., and Dell Inc. are shown as follows at the end of a recent fiscal period: (a) Determine the quick ratio for both companies.(b) Interpret the quick ratio difference between the twocompanies.
If a bond is purchased between interest payment periods, how is the accrued interest treated?
If an investor owns more than 50% of an investee, how is this treated on the investor’s financial statements?
What is the major difference in the accounting for a portfolio of trading securities and a portfolio of available-for-sale securities?
Are held-to-maturity securities(a) Equity investments,(b) Debt investments, or(c) Both?
What is the evidence of the trend toward fair value accounting?
What are some potential disadvantages of fair value accounting?
Journalize the entries to record the following selected bond investment transactions for Olson Technologies:(a) Purchased for cash $90,000 of Hart Industries 7% bonds at 100 plus accrued interest of $1,050.(b) Received first semiannual interest.(c) Sold $60,000 of the bonds at 102 plus accrued
Journalize the entries to record the following selected bond investment transactions for First Union:(a) Purchased for cash $400,000 of Medford City 5% bonds at 100 plus accrued interest of $4,500.(b) Received first semiannual interest.(c) Sold $250,000 of the bonds at 97 plus accrued interest of
On August 15, 2,500 shares of Collins Company are acquired at a price of $51 per share plus a $125 brokerage fee. On September 10, a $1.10-per-share dividend was received on the Collins Company stock. On October 5, 1,000 shares of the Collins Company stock were sold for $45 per share less a $50
On February 12, 6,000 shares of Gilbert Company are acquired at a price of $22 per share plus a $240 brokerage fee. On April 22, a $0.42-per-share dividend was received on the Gilbert Company stock. On May 10, 4,000 shares of the Gilbert Company stock were sold for $28 per share less a $160
On January 2, Leonard Company acquired 30% of the outstanding stock of Bristol Company for $350,000. For the year ending December 31, Bristol Company earned income of $90,000 and paid dividends of $28,000. Prepare the entries for Leonard Company for the purchase of the stock, share of Bristol
On January 2, Trey Company acquired 40% of the outstanding stock of Manning Company for $205,000. For the year ending December 31, Manning Company earned income of $48,000 and paid dividends of $14,000. Prepare the entries for Trey Company for the purchase of the stock, share of Manning income, and
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