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On January 1,
2013
, JWS Corporation issued $771,000
of 9% bonds, due in 8 years. The bonds were issued for $729,219, and pay interest each July 1 and January 1. JWS uses the effective-interest method.
Prepare the company’s journal entries for
(a
)
the January 1 issuance,
(b)
the July 1 interest payment, and
(c)
the
D
ecember 31 adjusting entry.
A
ssume an effective-interest rate of 10%.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
|
N o. |
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|
Account Titles and Explanation |
Debit |
Credit |
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(b)
(c)
Wasserman Corporation issued 10-year bonds on January 1, 2013. Costs associated with the bond issuance were $191,800. Wasserman uses the straight-line method to amortize bond issue costs.
Prepare the December 31, 2013, entry to record 2013 bond issue cost amortization.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Samson Corporation issued a 5-year, $92,800, zero-interest-bearing note to Brown Company on January 1, 2013, and received cash of $46,138. The implicit interest rate is 15%.
Prepare Samson’s journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
|
(a) |
Foreman Company issued $756,000 of 10%, 20-year bonds on January 1, 2013, at 102. Interest is payable semiannually on July 1 and January 1. Foreman Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%.
Prepare the journal entries to record the following.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| (a) |
The issuance of the bonds. |
|
| (b) |
The payment of interest and related amortization on July 1, 2013. |
|
| (c) |
The accrual of interest and the related amortization on December 31, 2013. |
No.
Account Titles and Explanation
Debit
Credit
(a)
(b)
(c)
On January 1,
2012
, Osborn Company sold 11% bonds having a maturity value of $843,000 for $943,973, which provides the bondholders with a 8% yield. The bonds are dated January 1, 2012, and mature January 1, 2017, with interest payable December 31 of each year. Osborn Company allocates interest and unamortized discount or premium on the effective-interest basis.
(a) Prepare the journal entry at the date of the bond issuance.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) Prepare a schedule of interest expense and bond amortization for 2012–
2014
.
(Round answers to 0 decimal places, e.g. $38,548.)
|
Schedule of Interest Expense and Bond Premium Amortization |
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|
Date |
Cash |
Interest Expense |
Premium |
Carrying |
|||||||||||||||||
|
1/1/12 |
$ |
||||||||||||||||||||
|
12/31/12 |
|||||||||||||||||||||
|
12/31/13 |
|||||||||||||||||||||
|
12/31/14 |
(c) Prepare the journal entry to record the interest payment and the amortization for 2012.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(d)
Prepare the journal entry to record the interest payment and the amortization for 2014.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
The following amortization and interest schedule reflects the issuance of 11-year bonds by Capulet Corporation on January 1,
2006
, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.
|
Amortization Schedule |
||||||||||||
|
Year |
Cash | Interest |
Amount |
Carrying |
||||||||
|
1/1/2006 |
$17,8 96 |
$ 132,804 |
||||||||||
| 2006 |
$
15,070 |
$15,936 |
17,030 |
133,670 |
||||||||
|
2007 |
15,070 |
16,040 |
16,060 |
134,640 |
||||||||
|
2008 |
16,157 |
14,973 |
135,727 |
|||||||||
|
2009 |
16,287 |
13,756 |
136,944 |
|||||||||
|
2010 |
16,433 |
12,393 |
138,307 |
|||||||||
|
2011 |
16,597 |
10,866 |
139,834 |
|||||||||
|
2012 |
16,780 |
9,156 |
141,544 |
|||||||||
| 2013 |
16,985 |
7,241 |
143,459 |
|||||||||
| 2014 |
17,215 |
5,096 |
145,604 |
|||||||||
|
2015 |
20,166 |
150,700 |
(a) Indicate whether the bonds were issued at a premium or a discount.
(b) Indicate whether the amortization schedule is based on the straight-line method or the effective-interest method.
(c) Determine the stated interest rate and the effective-interest rate.
(Round answers to 0 decimal places, e.g. $38,548.)
|
The stated rate |
% |
|
|
The effective rate |
(d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2006.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(e)
On the basis of the schedule above, prepare the journal entry to reflect the bond transactions and accruals for 2006. (Interest is paid January 1.)
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(f)
On the basis of the schedule above, prepare the journal entries to reflect the bond transactions and accruals for 2013. Capulet Corporation does not use reversing entries.
(Round answers to 0 decimal places, e.g. $38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
|
Jan. 1, 2013 |
|
Dec. 31, 2013 |
Novak Corporation is preparing its 2012 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2012 statement of cash flows.
|
Code Letter |
Effect |
| A |
Added to net income in the operating section |
| D |
Deducted from net income in the operating section |
|
R-I |
Cash receipt in investing section |
|
P-I |
Cash payment in investing section |
|
R-F |
Cash receipt in financing section |
|
P-F |
Cash payment in financing section |
| N |
Noncash investing and financing activity |
|
Purchase of land and building. |
|
|
Decrease in accounts receivable. |
|
|
Issuance of stock. |
|
| (d) |
Depreciation expense . |
| (e) |
Sale of land at book value. |
| (f) |
Sale of land at a gain. |
|
(g) |
Payment of dividends. |
|
(h) |
Increase in accounts receivable. |
|
(i) |
Purchase of available-for-sale investment. |
|
(j) |
Increase in accounts payable. |
|
(k) |
Decrease in accounts payable. |
|
(l) |
Loan from bank by signing note. |
|
(m) |
Purchase of equipment using a note. |
|
(n) |
Increase in inventory. |
|
(o) |
Issuance of bonds. |
|
(p) |
Retirement of bonds payable. |
|
(q) |
Sale of equipment at a loss. |
|
(r) |
Purchase of treasury stock. |
Bloom Corporation had the following 2012 income statement.
|
Sales |
$209,620 |
|||
|
Cost of goods sold |
118,970 |
|||
|
Gross profit |
90,650 |
|||
|
Operating expenses (includes depreciation of $24,940) |
54,020 |
|||
|
Net income |
$36,630 |
The following accounts increased during 2012: Accounts Receivable $11,030;
Inventory
$10,310; Accounts Payable $14,820. Prepare the cash flows from operating activities section of Bloom’s 2012 statement of cash flows using the direct method.
|
Bloom Corporation |
|
Cash received from customers |
= |
($209,620 – $11,030) |
$198,590 |
|||||||||||||||||
|
Cash payment to suppliers |
($118,970 + $10,310 – $14,820) |
$114,460 |
||||||||||||||||||
|
Cash payment for operating expenses |
($54,020 – $24,940) |
$29,080 |
Loveless Corporation had the following 2012 income statement.
|
Revenues |
$102,933 |
|
Expenses |
58,460 |
|
$44,473 |
In 2012, Loveless had the following activity in selected accounts.
|
Accounts Receivable |
|||||||||||
|
1/1/12 21,440 Revenues 102,933 12/31/12 35,093 |
Write-offs 1,010 Collections 88,270 | ||||||||||
|
Allowance for Doubtful Accounts |
|||||||||||
|
Write-offs 1,010
|
1/1/12 1,248 Bad debt expense 1,762 12/31/12 2,000 |
(a) Prepare Loveless’s cash flows from operating activities section of the statement of cash flows using the direct method.
|
Loveless Corporation |
(b) Prepare Loveless’s cash flows from operating activities section of the statement of cash flows using the indirect method.
(If an amount reduces the account balance then enter with negative sign.)
|
Loveless Corporation |
|
Cash paid for expenses |
($58,460 – $1,762) |
$56,698 |
|
Increase in net accounts receivable |
($33,093* – $20,192**) |
$12,901 |
|
* ($35,093 – $2,000) = $33,093 |
||
|
** ($21,440 – $1,248) = $20,192 |
Norman Company’s income statement for the year ended December 31, 2012, contained the following condensed information.
|
Service revenue |
$831,780 |
||
|
Operating expenses (excluding depreciation) |
$627,170 |
||
| Depreciation expense |
60,370 |
||
|
Loss on sale of equipment |
20,580 |
708,120 |
|
|
Income before income taxes |
123,660 |
||
|
Income tax expense |
39,850 |
||
|
$83,810 |
Norman’s balance sheet contained the following comparative data at December 31.
| 2012 |
2011 |
||||
|
Accounts receivable |
$37,420 |
$58,130 |
|||
|
Accounts payable |
46,480 |
32,000 |
|||
|
Income taxes payable |
3,710 |
8,060 |
(Accounts payable pertains to operating expenses.)
Prepare the operating activities section of the statement of cash flows using the direct method.
|
NORMAN COMPANY |
Norman Company’s income statement for the year ended December 31, 2012, contained the following condensed information.
|
$842,220 |
|
|
$620,990 |
|
|
56,270 |
|
|
23,980 |
701,240 |
|
140,980 |
|
|
41,940 |
|
|
$99,040 |
Norman’s balance sheet contained the following comparative data at December 31.
|
$37,810 |
$59,540 |
|
45,130 |
31,690 |
|
4,200 |
8,960 |
(Accounts payable pertains to operating expenses.)
Prepare the operating activities section of the statement of cash flows using the indirect method.
(If an amount reduces the account balance then enter with negative sign.)
|
Adjustments to reconcile net income to |
Condensed financial data of Fairchild Company for 2012 and 2011 are presented below.
|
FAIRCHILD COMPANY |
||||
|
$1,805 |
$1,097 |
|||
|
Receivables |
1,753 |
1,301 |
||
| Inventory |
1,594 |
1,919 |
||
|
Plant assets |
1,901 |
1,696 |
||
|
Accumulated depreciation |
(1,191 |
) |
(1,167 |
|
|
Long-term investments (held-to-maturity) |
1,306 |
1,475 |
||
|
$7,168 |
$6,321 |
|||
|
$1, 205 |
$794 |
|||
|
Accrued liabilities |
205 |
246 |
||
|
Bonds payable |
1,410 |
1,637 |
||
|
Common stock |
1,900 |
1,698 |
||
|
Retained earnings |
2,448 |
1,946 |
|
FAIRCHILD COMPANY |
|
|
$6,845 |
|
|
4,708 |
|
|
Gross margin |
2,137 |
|
Selling and administrative expenses |
924 |
|
Income from operations |
1,213 |
|
Other revenues and gains |
|
|
Gain on sale of investments |
96 |
|
Income before tax |
1,309 |
|
534 |
|
|
$775 |
Additional information:
During the year, $63 of common stock was issued in exchange for plant assets. No plant assets were sold in 2012. Cash dividends were $273.
Prepare a statement of cash flows using the indirect method.
(If an amount reduces the account balance then enter with negative sign.)
|
FAIRCHILD COMPANY |
||
|
($1,191 – $1,167) |
$24 |
|
|
Sale of held-to-maturity investments |
[($1,475 – $1,306) + $96] |
$265 |
|
Purchase of plant assets |
[($1,901 – $1,696) – $63] |
($142) |
|
Issuance of capital stock |
[($1,900 – $1,698) – $63] |
$139 |
