Question 1

Mehring's 2014 financial statements contained the following data (in millions).  Instructions
Compute these values:
(a) Working capital. (b) Current ratio.

Accepted Answer

The answer of Mehring's 2014 financial statements contained the following...

Question 2

On January 1, 2014, Lang Corporation issued $1,500,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Lang Corporation has a calendar year end.
Instructions
Prepare all entries related to the bond issue for 2014.

Accepted Answer

The answer of On January 1, 2014, Lang Corporation issued...

Question 3

English Company billed its customers a total of $1,470,000 for the month of November. The total includes a 5% sales tax.
Instructions
(a) Determine the proper amount of revenue to report for the month.
(b) Prepare the general journal entry to record the revenue and related liabilities for the month.

Accepted Answer

The answer of English Company billed its customers a total...

Question 4

Downey Corporation issues a ₤4,000,000, 12%, 20-year mortgage note payable on December 31, 2014, to obtain needed financing for the construction of a building addition. The terms provide for semiannual installment payments of ₤265,848 on June 30 and December 31.
Instructions
(a) Prepare the journal entries to record the mortgage loan on December 31, 2014, and the first installment payment.
(b) Will the amount of principal reduction in the second installment payment be more or less than with the first installment payment?

Accepted Answer

The answer of Downey Corporation issues a ₤4,000,000, 12%, 20-year...

Question 5

Banks Company is considering two alternatives to finance its purchase of a new $4,000,000 office building.
(a) Issue 400,000 ordinary shares at $10 per share.
(b) Issue 8%, 10-year bonds at par ($4,000,000).
Income before interest and taxes is expected to be $3,000,000. The company has a 30% tax rate and has 800,000 ordinary shares outstanding prior to the new financing.
Instructions
Calculate each of the following for each alternative:
(1) Net income.
(2) Earnings per share.

Accepted Answer

The answer of Banks Company is considering two alternatives to...

Question 6

On January 1, Porter Corporation issued $800,000, 6%, 5-year bonds at face value. Interest is payable semiannually on July 1 and January 1.
Instructions
Prepare journal entries to record the
(a) Issuance of the bonds.
(b) Payment of interest on July 1, assuming no previous accrual of interest.
(c) Accrual of interest on December 31.

Accepted Answer

The answer of On January 1, Porter Corporation issued $800,000,...

Question 7

On March 1, Jordan Company borrows $180,000 from Ottawa State Bank by signing a 6-month, 8%, interest-bearing note.
Instructions
Prepare the necessary entries below associated with the note payable on the books of Jordan Company.
(a) Prepare the entry on March 1 when the note was issued.
(b) Prepare any adjusting entries necessary on June 30 in order to prepare the semi-annual financial statements. Assume no other interest accrual entries have been made.
(c) Prepare the adjusting entry at August 31 to accrue interest.
(d) Prepare the entry to record payment of the note at maturity.

Accepted Answer

The answer of On March 1, Jordan Company borrows $180,000...

Question 8

Presented below are two independent situations:
(a) Howell Corporation purchased $700,000 of its bonds on June 30, 2014, at 102 and immediately retired them. The carrying value of the bonds on the retirement date was $679,000. The bonds pay semiannual interest and the interest payment due on June 30, 2014, has been made and recorded.
(b) Justice, Inc. purchased $400,000 of its bonds at 97 on June 30, 2014, and immediately retired them. The carrying value of the bonds on the retirement date was $393,000. The bonds pay semiannual interest and the interest payment due on June 30, 2014, has been made and recorded.
Instructions
For each of the independent situations, prepare the journal entry to record the retirement of the bonds.

Accepted Answer

The answer of Presented below are two independent situations:
(a) Howell...

Question 9

Wood Company retired $750,000 face value, 9% bonds on June 30, 2014 at 98. The carrying value of the bonds at the redemption date was $760,000.
Instructions
Prepare the journal entry to record the redemption of the bonds.

Accepted Answer

The answer of Wood Company retired $750,000 face value, 9%...

Question 10

Riley Company issued a $4,000,000, 10%, 10-year mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $320,973.
Instructions
Prepare the entry to record:
(a) the mortgage loan on December 31, 2014.
(b) the first installment payment.

Accepted Answer

The answer of Riley Company issued a $4,000,000, 10%, 10-year...

Question 11

Hibbett Company does not segregate sales and sales taxes on its cash register. Its register total for the month is $291,500, which includes a 6% sales tax.
Instructions
Compute sales taxes payable, and make the entry to record sales and sales taxes payable.

Accepted Answer

The answer of Hibbett Company does not segregate sales and...

Question 12

Wellington Company had the following transactions involving notes payable.
Nov. 1, 2013 Borrows $150,000 from Olathe State Bank by signing a 3-month, 10% note.
Dec. 31, 2013 Prepares the adjusting entry.
Feb. 1, 2014 Pays principal and interest to Olathe State Bank.
Instructions
Prepare journal entries for each of the transactions.

Accepted Answer

The answer of Wellington Company had the following transactions involving...

Question 13

The board of directors of Gibson Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $4,000,000, 6%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 ordinary shares with a $5 par value which are selling for $40 per share on the open market. Gibson Corporation currently has 100,000 ordinary shares outstanding and the income tax rate is expected to be 30%. Assume that income before interest and income taxes is expected to be $800,000 if the new factory equipment is purchased.
Instructions
Prepare a schedule which shows the expected net income after taxes and the earnings per share under each of the plans that the board of directors is considering.

Accepted Answer

The answer of The board of directors of Gibson Corporation...

Question 14

Three plans for financing a ¥25,000,000 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 30%.  It is estimated that income before interest and taxes will be ¥5,000,000.
Instructions
Determine for each plan, the expected net income and the earnings per share.

Accepted Answer

The answer of Three plans for financing a ¥25,000,000 corporation...

Question 15

Carpino Company issued €800,000 of bonds on January 1, 2014.
Instructions
(a) Prepare the journal entry to record the retirement of the bonds at maturity, assuming the bonds were issued at 100.
(b) Prepare the journal entry to record the retirement of the bonds before maturity at 98. Assume the carrying value of the bonds was $805,000.

Accepted Answer

The answer of Carpino Company issued €800,000 of bonds on...

Question 16

Based on the following information, compute the (1) current ratio and (2) working capital.

Accepted Answer

The answer of Based on the following information, compute the...

Question 17

Flores Company publishes a monthly sports magazine, Hunting Preview. Subscriptions to the magazine cost $20 per year. During October 2013, Flores sells 24,000 subscriptions beginning with the November issue. Flores prepares financial statements quarterly and recognizes subscription revenue earned at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue.
Instructions
(a) Prepare the entry in October for the receipt of the subscriptions.
(b) Prepare the adjusting entry at December 31, 2013, to record subscription revenue earned in December 2013.
(c) Prepare the adjusting entry at March 31, 2014, to record subscription revenue earned in the first quarter of 2014.

Accepted Answer

The answer of Flores Company publishes a monthly sports magazine,...

Question 18

United Health is considering two alternatives for the financing of some high technology medical equipment. These two alternatives are:
1. Issue 50,000 ordinary shares with a $10 par value at $50 per share.
2. Issue $2,500,000, 10%, 10-year bonds at par.
It is estimated that the company will earn $900,000 before interest and taxes as a result of acquiring the medical equipment. The company has an estimated tax rate of 30% and has 120,000 ordinary shares outstanding prior to the new financing.
Instructions
Determine the effect on net income and earnings per share for these two methods of financing.

Accepted Answer

The answer of United Health is considering two alternatives for...

Question 19

Taylor Corporation issued $3 million, 10-year, 6% bonds on January 1, 2014.
Instructions
Prepare the entry to record the sale of these bonds, assuming they were issued at
(a) 98.
(b) 103.

Accepted Answer

The answer of Taylor Corporation issued $3 million, 10-year, 6%...

Question 20

The following section is taken from Brown Corp's statement of financial position at December 31, 2013.  Interest is payable semiannually on January 1 and July 1. The bonds are callable on any interest date.
Instructions
(a) Journalize the payment of the bond interest on January 1, 2014.
(b) Assume that on January 1, 2014, after paying interest, Brown calls bonds having a face value of $1,600,000. The call price is 104. Record the redemption of the bonds.
(c) Prepare the entry to record the payment of interest on July 1, 2014, assuming no previous accrual of interest on the remaining bonds.

Accepted Answer

The answer of The following section is taken from Brown...

Quiz 10: Liabilities

Mehring's 2014 financial statements contained the following data (in millions). Instructions Compute these values: (a) Working capital. (b) Current ratio.

On January 1, 2014, Lang Corporation issued $1,500,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Lang Corporation has a calendar year end. Instructions Prepare all entries related to the bond issue for 2014.

Wood Company retired $750,000 face value, 9% bonds on June 30, 2014 at 98. The carrying value of the bonds at the redemption date was $760,000. Instructions Prepare the journal entry to record the redemption of the bonds.

Hibbett Company does not segregate sales and sales taxes on its cash register. Its register total for the month is $291,500, which includes a 6% sales tax. Instructions Compute sales taxes payable, and make the entry to record sales and sales taxes payable.

Based on the following information, compute the (1) current ratio and (2) working capital.

Taylor Corporation issued $3 million, 10-year, 6% bonds on January 1, 2014. Instructions Prepare the entry to record the sale of these bonds, assuming they were issued at (a) 98. (b) 103.