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Accounting 23rd Edition Carl S. Warren - Solutions

=+EX 14-12 Entries for issuing installment note transactions obj. 4 At the beginning of the current year, two bond issues (X and Y) were outstanding.During the year, bond issue X was redeemed and a significant loss on the redemption of bonds was reported as an extraordinary item on the income
=+b. Journalize the entries for the issuance of the note and the four annual note payments.
=+a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 3.
=+EX 14-11 Entries for issuing installment note transactions obj. 4 On January 1, 2010, Zinn Company obtained a $52,000, four-year, 6.5% installment note from Fidelity Bank. The note requires annual payments of $15,179, beginning on December 31, 2011.
=+Dec. 31 Paid the annual payment on the note, which consisted of interest of $2,353 and principal of $21,419.
=+Dec. 31 Paid the annual payment on the note, which consisted of interest of$15,400 and principal of $8,372.2019
=+EX 14-10 Entries for issuing installment note transactions obj. 4 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:2010
=+b. Determine the amount of bond interest expense for the first year.
=+2. Paid the first annual payment on the note.
=+a. Journalize the entries to record the following:1. Issued the installment notes for cash on the first day of the fiscal year.
=+EX 14-16 Present value of an annuity✔ $21,070,740 648 Chapter 14 Long-Term Liabilities: Bonds and Notes 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
=+EX 14-15 Present value of an annuity 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
=+b. By using the present value table in Exhibit 5.Appendix 1
=+a. By successive computations, using the present value table in Exhibit 4.
=+EX 14-9 Entries for issuing and calling bonds;gain obj. 3 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:
=+EX 14-8 Entries for issuing and calling bonds;loss obj. 3 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
=+EX 14-7 Entries for issuing bonds and amortizing premium by straight-line method objs. 2, 3 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
=+b. First interest payment on September 1, 2010, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.)
=+EX 14-6 Entries for issuing bonds and amortizing discount by straight-line method obj. 3✔b. $5,130,648 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%,
=+b. Determine the amount of the bond interest expense for the first year.
=+4 . Amortization of discount at the end of the first year, using the straight-line method. (Round to the nearest dollar.)
=+3. Second semiannual interest payment.
=+2. First semiannual interest payment. (Amortization of discount is to be recorded annually.)
=+a. Journalize the entries to record the following:1. Sale of the bonds.
=+EX 14-5 Entries for issuing bonds obj. 3 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
=+Dec.31. Recorded accrued interest for three months.
=+Oct. 1. Paid the interest on the bonds.
=+EX 14-4 Bond price obj. 3 Chapter 14 Long-Term Liabilities: Bonds and Notes 647 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
=+EX 14-3 Corporate financing obj. 1 Procter and Gamble’s 8% bonds due in 2024 were reported as selling for 126.987.Were the bonds selling at a premium or at a discount? Explain.
=+EX 14-2 Evaluate alternative financing plans obj. 1 The financial statements for Nike, Inc., are presented in Appendix E at the end of the text. What is the major source of financing for Nike?
=+EX 14-1 Effect of financing on earnings per share obj. 1✔a. $0.50 Based on the data in Exercise 14-1, discuss factors other than earnings per share that should be considered in evaluating such financing plans.
=+Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $3,000,000, (b) $4,000,000, and (c) $5,000,000.
=+PE 14-7B Journalizing installment notes obj. 4 EE 14-7 p. 631 Exercises Miller Co., which produces and sells skiing equipment, is financed as follows:Bonds payable, 10% (issued at face amount) $10,000,000 Preferred $1 stock, $10 par 10,000,000 Common stock, $25 par 10,000,000 Income tax is
=+PE 14-7A Journalizing installment notes obj. 4 EE 14-7 p. 631 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.
=+b. Journalize the first annual note payment.
=+a. Journalize the entry to record the issuance of the installment notes.
=+PE 14-6B Redemption of bonds payable obj. 3 EE 14-6 p. 628 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.
=+PE 14-6A Redemption of bonds payable obj. 3 EE 14-6 p. 628 Chapter 14 Long-Term Liabilities: Bonds and Notes 645 646 Chapter 14 Long-Term Liabilities: Bonds and Notes A $200,000 bond issue on which there is an unamortized premium of $15,000 is redeemed for $195,000. Journalize the redemption of
=+PE 14-5B Premium amortization obj. 3 EE 14-5 p. 627 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.
=+EE 14-5 p. 627 Using the bond from Practice Exercise 14-4B, journalize the first interest payment and the amortization of the related bond premium.
=+PE 14-5A Premium amortization obj. 3
=+EE 14-4 p. 626 Using the bond from Practice Exercise 14-4A, journalize the first interest payment and the amortization of the related bond premium.
=+PE 14-4B Issuing bonds at a premium obj. 3
=+PE 14-4A Issuing bonds at a premium obj. 3 EE 14-4 p. 626 A company issues a $3,000,000, 12%, five-year bond that pays semiannual interest of$180,000 ($3,000,000 12% 1⁄2 ), receiving cash of $3,146,200. Journalize the bond issuance.
=+PE 14-3B Discount amortization obj. 3 EE 14-3 p. 625 A company issues a $5,000,000, 11%, five-year bond that pays semiannual interest of$275,000 ($5,000,000 11% 1⁄2 ), receiving cash of $5,193,030. Journalize the bond issuance.
=+PE 14-3A Discount amortization obj. 3 EE 14-3 p. 625 Using the bond from Practice Exercise 14-2B, journalize the first interest payment and the amortization of the related bond discount.
=+Using the bond from Practice Exercise 14-2A, journalize the first interest payment and the amortization of the related bond discount.
=+On the first day of the fiscal year, a company issues a $750,000, 7%, five-year bond that pays semiannual interest of $26,250 ($750,000 7% 1⁄2 ), receiving cash of $663,128.Journalize the bond issuance.
=+On the first day of the fiscal year, a company issues a $1,000,000, 11%, 10-year bond that pays semiannual interest of $55,000 ($1,000,000 11% 1 ⁄2), receiving cash of $942,646. Journalize the bond issuance.
=+Simonelli Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 8% bonds (at face value) $5,000,000 4,000,000 Issue preferred $2.00 stock, $20 par — 2,000,000 Issue common stock, $25 par 5,000,000 4,000,000 Income tax is estimated at 40% of income. Determine the
=+Folmar Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 10% bonds (at face value) $2,000,000 $1,000,000 Issue preferred $1 stock, $5 par — 1,500,000 Issue common stock, $5 par 2,000,000 1,500,000 Income tax is estimated at 40% of income. Determine the earnings
=+16. What has the higher present value: (a) $20,000 to be received at the end of two years, or (b) $10,000 to be received at the end of each of the next two years?
=+15. What is meant by the phrase “time value of money”?
=+14. Sol Company issued $10,000,000 of bonds payable at a price of 102. How would the premium on the bonds payable be presented on the balance sheet?
=+13. 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?
=+12. Fleeson Company needs additional funds to purchase equipment for a new production facility and is considering either issuing bonds payable or borrowing the money from a local bank in the form of an installment note. How does an installment note differ from a bond payable?
=+11. What is a mortgage note?
=+10. Bonds Payable has a balance of $1,000,000, and Discount on Bonds Payable has a balance of $50,000. If the issuing corporation redeems the bonds at 98, is there a gain or loss on the bond redemption?
=+9. Assume that two 30-year, 10% bond issues are identical, except that one bond issue is callable at its face amount at the end of five years. Which of the two bond issues do you think will sell for a lower value?
=+8 . When a corporation issues bonds at a discount, is the discount recorded as income when the bonds are issued? Explain.
=+ 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?
=+7 . Assume that Smith Co. amortizes premiums and discounts on bonds payable at the end of the year rather than when interest is paid.
=+ (c) What account was debited to amortize the discount or premium?
=+ (b) What is the unamortized amount of the discount or premium account at the beginning of the period?
=+(a) Were the bonds issued at a discount or at a premium?
=+6. 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 $112,085,373 Interest paid during period 6,000,000 Interest expense allocable to the period 5,623,113
=+5. If bonds issued by a corporation are sold at a premium, is the market rate of interest greater or less than the contract rate?
=+(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) contract rate of interest, and(4) maturity amount.
=+4 . A corporation issues $9,000,000 of 9% bonds to yield interest at the rate of 7%.
=+3 . If you asked your broker to purchase for you a 10% bond when the market interest rate for such bonds was 11%, would you expect to pay more or less than the face amount for the bond? Explain.
=+2. Explain the meaning of each of the following terms as they relate to a bond issue:(a) convertible, (b) callable, and (c) debenture.
=+1. Describe the two distinct obligations incurred by a corporation when issuing bonds.
=+5. The balance in the discount on bonds payable account would usually be reported on the balance sheet in the:A. Current Assets section.B. Current Liabilities section.C. Long-Term Liabilities section.D. Investments section.
=+4. If a company borrows money from a bank as an installment note, the interest portion of each annual payment will:A. equal the interest rate on the note times the face amount.B. equal the interest rate on the note times the carrying amount of the note at the beginning of the period.C. increase
=+3. If the bonds payable account has a balance of$900,000 and the discount on bonds payable account has a balance of $72,000, what is the carrying amount of the bonds?A. $828,000 C. $972,000 B. $900,000 D. $580,000
=+2 . If a corporation plans to issue $1,000,000 of 12%bonds at a time when the market rate for similar bonds is 10%, the bonds can be expected to sell at:A. their face amount.B. a premium.C. a discount.D. a price below their face amount.
=+1. Which of the following measures might a company use to compare alternative financing decisions?A. The price of the bond issue B. The discount on the bonds payable C. Earnings per share D. Interest expense
=+Dec. 31. Paid the semiannual interest on the bonds. 31. Recorded straight-line amortization of $1,600 of discount on the bonds. 31. Closed the interest expense account. 2010 June 30 . Paid the semiannual interest on the bonds. Dec. 31. Paid the semiannual interest on the bonds. 31. Recorded
=+The fiscal year of Russell Inc., a manufacturer of acoustical supplies, ends December 31. Selected transactions for the period 2009 through 2016, involving bonds payable issued by Russell Inc., are as follows: 2009 June 30. Issued $2,000,000 of 25-year, 7% callable bonds dated June 30, 2009, for
Use annual reports, the Internet, or library resources in doing this activity.
=+3. Types of processes used by the selected company.Use annual reports, the Internet, or library resources in doing this activity.
=+2. Typical raw materials used by the selected company.
=+1. Typical products manufactured by the selected company, including brand names.
=+The following categories represent typical process manufacturing industries:Beverages Metals Chemicals Petroleum refining Food Pharmaceuticals Forest and paper products Soap and cosmetics In groups of two or three, for each category identify one company (following your instructor’s specific
=+5. C The electricity costs have increased, and maintenance costs have decreased. Answer C would be a reasonable explanation for these results. The total costs, materials costs, and costs per unit do not reveal any type of pattern over the time period. In fact, the materials costs have stayed at
=+4. A The conversion costs (direct labor and factory overhead) totaling $48,750 are divided by the number of equivalent units (4,875) to determine the unit conversion cost of $10 (answer A).
=+To process units started and completed in May (5,500 units 1,000 units) . . . . . . . . . 4,500 To process units in inventory on May 31(500 units 1⁄4) . . . . . . . . . . . . . . . . . . . . . . . . 125 _____ Equivalent units of production in May . . . . . . . . 4,875 _____ _____
=+3. B The number of units that could have been produced from start to finish during a period is termed equivalent units. The 4,875 equivalent units (answer B) is determined as follows:To process units in inventory on May 1(1,000 1⁄4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
=+2. A The total pounds transferred to finished goods(23,000) are the 2,000 in-process pounds at the beginning of the period plus the number of pounds started and completed during the month, 21,000 (24,000 3,000). Answer B incorrectly assumes that the beginning inventory is not transferred
=+1. C The process cost system is most appropriate for a business where manufacturing is conducted by continuous operations and involves a series of uniform production processes, such as the processing of crude oil (answer C). The job order cost system is most appropriate for a business where the
=+SA 20-4 Decision making 946 Chapter 20 Process Cost Systems Answers to Self-Examination Questions
=+September 9 Requested by: Alicia Sparks Papermaking Department—August detail Assuming that you’re Alicia Sparks, write a memo to Duran Orr with a recommendation to management. You should analyze the August data to determine whether the paper machine or the paper color explains the increase
=+Alicia: Do you have any other suspicions?Josh: Well, as you know, we have two products—green paper and yellow paper. They are identical except for the color. The color is added to the papermaking process in the paper machine. I think that during August these two color papers have been behaving
=+Duran was concerned about the increased cost per ton from the output of the department. As a result, he asked the plant controller to perform a study to help explain these results. The controller, Alicia Sparks, began the analysis by performing some interviews of key plant personnel in order to
=+Department. The reports revealed the following:July August Pulp and chemicals . . . . . . . . . . . $300,000 $307,000 Conversion cost . . . . . . . . . . . . . . 150,000 153,000 _________ _________ Total cost . . . . . . . . . . . . . . . . . . . $450,000 $460,000 Number of tons . . . . . . . . .
=+You are looking over some cost of production reports segmented by cookie line.You notice that there is a drop in the materials costs for Full of Chips. On further investigation, you discover why the chip costs have declined (fewer chips). Both you and Lee report to the division vice president,
=+SA 20-2 Accounting for materials costs Chips cookie uses a lot of chips, which increases the cost of the cookie. As a result, Lee has ordered that the amount of chips used in the cookies be reduced by 10%. The manager believes that a 10% reduction in chips will not adversely affect sales, but
=+b. What “hidden costs” are not considered when accounting for broke as described above?
=+a. How do you react to this accounting procedure?
=+In this industry, it is typical to charge the papermaking operation with the cost of direct materials, which is a mixture of virgin materials and broke. Broke has a much lower cost than does virgin pulp. Therefore, the more broke in the mixture, the lower the average cost of direct materials to

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