The Brown Corporation experienced the following financial events on October 10, 2015: 1. The company entered into a new contract
The Brown Corporation experienced the following financial events on October 10, 2015:
1. The company entered into a new contract with the employees’ union that calls for a $2.00 per hour increase in wages, a longer lunch break, and cost-of-living adjustments, effective January 1, 2016.
2. The company issued $200,000 in bonds that mature on October 10, 2025. The terms of the bond issuance stipulate that interest is to be paid semiannually at an annual rate of 10 percent.
3. The company president retired and was replaced by the vice president of finance.
4. The company received $10,000 from a customer in settlement of an open account receivable.
5. The company paid $1,000 interest on an outstanding loan. The interest is applicable to September 2015 and is included on the books as a liability, “Accrued Interest Payable.”
6. The market value of all the company’s long-lived assets is $275,000. They are currently reported on the balance sheet at $250,000.
7. The company purchased a fire insurance policy for $1,500 that will pay the Brown Corporation $1 million if its primary production plant is destroyed. The policy insures the company from November 1, 2015, through October 31, 2016.
8. The company placed an order to have $10,000 of inventory shipped on October 17, 2015.
Indicate whether each of these economic events has accounting significance (i.e., whether the company would prepare a journal entry for the event). In each case, explain why or why not.Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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