Problem 1
A company issues $100,000, 8%, 5-year bonds to yield 10% on 1/1/14. Interest ispaidon June 30 and December 31 . The proceeds from the bonds are $92,278.
Required:
Prepare an amortization schedule covering the period 1/1/16 to 12/31/16.
Problem2
At 12/31/16 a company owed $800,000 to Citibank. Due to financial difficulties,the company also owed accrued interest of $10,000.
Under a troubled debt restructuring, on 12/31/16, the company agreed to settle the debt for a tract of land having a fair value of $700,000. The company originally paid $620,000 for the land.
Required:
1 ) What is the gain or loss on disposal of the asset?
2) What is the amount of gain on restructuring?
Problem3
On 1/1/16a company had bonds payable of $500,000. The unamortized discount at 1/1/16 was $60,000. On 1/1/16 the company retired all the bonds at 98.
Required:
I) What is the carrying value of the bonds at 1/1/16?
2) What is the amount of gain or loss on retirement?
Problem4
On December 31, 2016, Malzberg Company issues $4,000,000 of 8% bonds at 101 . Each bond was issued with one detachable stock warrant, each entitled the bondholder to purchase one share of $2 par common stock for $20. Immediately after issuance, the bonds were selling in the market at 98. The market price of the warrants was $40 each.
Required:
How much of the proceeds was allocated to the warrants?
Problem5
Savage Company has $2,000,000 of 10% convertible bonds outstanding. Each $1,000 is convertible into 50 shares of $10 par value common stock. All of the bondholders exercised the conversion privilege when the market price of the stock was $21 . The unamortized discount at the date of conversion was $30,000.
Required:
What is the journal entry to record the conversion using the book value method?
Problem 6
On January 1, 2017, Piper Co. issued ten-year bonds with a face value of $1 ,000,000 and a stated interest rate of 10 %, payable semiannuall y on J ul y Iand January 1 . The bonds were sold to yield 12%. Table values are:
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Present value of 1 for 10 periods at 10%
|
.386
|
|
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Present value of I for 10 periods at 12%
|
.322
|
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Present value of I for 20periodsat5%
|
.377
|
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Present value of I for 20periodsat6%
Present value of annuity for 10 periods at 10%
|
.312
|
6.145
|
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Present value of annuity for 10 periods at 12%
|
|
5.650
|
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Present value of annuity for 20 periods at 5%
|
|
12.462
|
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Present value of annuity for 20 periods at 6%
|
|
I1.470
|
Required:
I. Prepare the journal entry required on January 1, 2017 to issue the bonds.
2. Prepare the journal an amortization schedule for period covering 1/1/17 to1/1/18
3. Assuming on January 1, 2018, 100% of the bonds were retired at 103, prepare the journal entry to record theretirement.
Problem 7
Sale-leaseback; capital lease
To raise operating funds) Signal Aviation sold an airplane on January 1, 2016, to a finance company for $810,000. Signal immediately l eased the plane back for a 10-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $840,000. Its cost and its book value were $640,000. Its useful life is expected to be 1 2 years. T'he lease requires Signal to make payments of $1 1 1 ,772 to the finance company each January I . Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 8%.The present value of an annuity due for 1 0 periods at 8% is 7.24689.
Required:
1 . Prepare the appropriate entries for Signal on .January 1 , 2016, to record the sale-leaseback
2. Prepare the appropriate entries for Signal on December 31 , 2016.
Problem 8
On January 1, 2016, Winn Heat Transfer leased office space under a four-year operating lease agreement. The arrangement specified four annual rent payments of $88,000 each, beginning January 1, 2016, the inception of the lease, and at each January 1 through 2019. Winn also paid a $104,000 advance payment at the inception of the lease in addition to the first $88,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $188,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value.
Required:
Prepare the appropriate entries for Winn Heat Transfer from the inception of the lease through the end of 2016. Winn's fiscal year is the calendar year. Winn uses straight-line depreciation.
Problem 9
Baruch Company provides the following information related to its investmentsinavailable-for-sale debtsecurities purchased at par on 1/1/15:
COST Fair Value12/31/15 FairValue12/31/16
$180 $200 $230
Baruch Company had net income for 2016 of $700 Assume the net income for 2015 was $1,000.
Required:
1) What is the amount of other comprehensive income for the year ended12/31/15?
2) What is the amount of accumulated comprehensive income for the year ended12/31/15?
3) What is the amount of accumulated other comprehensive income for the year ended12/31/16?
4) What is comprehensive income for 2016?
Problem 10
ITEMS 13-20 are based on thefollowing:
The following information pertains to Eli Kramer Inc. portfolio ofmarketableinvestments for the year ended December 31, 2016:
Fair Value12-31-15
2016activity FairvaluePurchases Sales 12-31-16
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Held-to-maturity debtsecurities
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|
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SecurityPuggy
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|
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$190,000
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$180,000
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TradingsecuritiesSecuritySlater
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$200,000
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$125,000
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325,000
|
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Available-for-sale debt securities
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|
|
|
|
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SecurityBeasley
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200,000
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280,000
|
|
380,000
|
|
SecurityEddie
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150,000
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200,000
|
|
250,000
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Amortization of discount on Security Puggy for 2016 was $5,000. All declines in fair value arc considered to be temporary. The net income for 2016 was $300,000.
REQUIRED: Items 13-20 describe amounts to be reported in Eli 's 2016 financial statements .Ignore income taxes. For each item enter the numerical amount on the Examination Answer Sheet.
13. Carrying amount of Security Puggy 12-31-16.
14.Carrying amount of Security Slater 12-31 -16
15. Carrying amount of Security Eddie 12-31- 16
16. Realized gain or (loss) on sale of Security Beasley.
17. Unrealized gain or (loss) to be reported in 2016 income statement.
18. Amount of other comprehensive income to be reported in the 2016 statement of comprehensive income
19. Comprehensive income for 2016.
20. Accumulated other comprehensive income at 12/31/16
Problem 11
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2016, for $400 million.
At the date of purchase, the book value of Vancouver's net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities.
The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2016.
Vancouver reported net income of $140 million for the year ended December 31, 2016. Vancouver paid a cash dividend of $30 million.
Required:
1. Prepare all appropriate journal entries related to the investment during 2016.
Problem 12
The following information pertains to Eli Kramer Inc. portfolio of marketable investments for the year ended December 31, 2016:
Fair Value12-31-15
2016activity FairvaluePurchases Sales 12-31-16
Amortization of discount on Security Puggy for 2016 was $5,000. All declines in fair value arc
|
Held-to-maturity debtsecurities
|
|
|
SecurityPuggy
|
|
|
$190,000
|
$180,000
|
|
TradingsecuritiesSecuritySlater
|
$200,000
|
$125,000
|
|
325,000
|
|
Available-for-sale debt securities
|
|
|
|
|
|
SecurityBeasley
|
200,000
|
280,000
|
|
380,000
|
|
SecurityEddie
|
150,000
|
200,000
|
|
250,000
|
considered to be temporary. The net income for 2016 was $300,000.
REQUIRED: Items 13-20 describe amounts to be reported in Eli 's 2016 financial
statements .Ignore income taxes. For each item enter the numerical amount on the
Examination Answer Sheet.
13. Carrying amount of Security Puggy 12-31-16.
14.Carrying amount of Security Slater 12-31 -16
21. Carrying amount of Security Eddie 12-31- 16
22. Realized gain or (loss) on sale of Security Beasley.
23. Unrealized gain or (loss) to be reported in 2016 income statement.
24. Amount of other comprehensive income to be reported in the 2016 statement of
comprehensive income
25. Comprehensive income for 2016.
26. Accumulated other comprehensive income at 12/31/16