(A) Welson Co. is being sued for illness caused to local residents as a result of negligence...
Question:
(A) Welson Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Welson's lawyer states that it is probable that Welson will lose the suit and be found liable for a judgment costing Welson anywhere from $400,000 to $2,000,000. However, the lawyer states that the most probable cost is $1,200,000. As a result of the above facts, Welson should accrue and what should be disclosed?
(B) On August 1, 2006, the Frost Company purchased property from Anderson that had a fair value of $399,271. Frost gave Anderson a $500,000 noninterest-bearing note payable in five equal annual installments of $100,000 with the first payment due July 31, 2007. What is the amount of interest expense that should be recognized by Frost in 2007, using the effective interest method?
(C) Pryor Corporation issued a 2-for-1 stock split of its common stock which had a par value of $10 before and after the split. At what amount should retained earnings be capitalized for the additional shares issued?
(D) On January 2, 2004, a calendar-year corporation sold 8% bonds with a face value of $1,500,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $1,384,000 to yield 10%. Using the effective interest method of computing interest, how much should be charged to interest expense in 2004?
(E) On its December 31, 2002, balance sheet, the Forge Corporation reported the following as investments in marketable equity securities which are classified as available for sale: Investment in marketable equity securities at cost $500,000 Less: valuation allowance 40,000 $460,000 At December 31, 2003, the market valuation of the portfolio was $490,000. What should Forge include in net income for 2003 as a result of the change in the market value of its investments?
(F) On February 10, 2005, after issuance of its financial statements for 2004, Goll Company entered into a financing agreement with Lebo Bank, allowing Goll Company to borrow up to $4,000,000 at any time through 2009. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. Goll Company presently has $1,500,000 of notes payable with First National Bank maturing March 15, 2005. The company intends to borrow $2,500,000 under the agreement with Lebo and liquidate the notes payable to First National. The agreement with Lebo also requires Goll to maintain a working capital level of $6,000,000 and prohibits the payment of dividends on common stock without prior approval by Lebo Bank. From the above information only, the total short-term debt of Goll Company as of the December 31, 2004 balance sheet date is __________________.
Business Law The Ethical Global and E-Commerce Environment
ISBN: 978-0071317658
15th edition
Authors: Jane Mallor, James Barnes, Thomas Bowers, Arlen Langvardt