Question 1. On July 23, Plitt Company factored $300,000 in accounts receivable for cash of $280,000. The factor withheld 7 percent of the cash proceeds to allow for possible customer returns. An allowance for doubtful accounts of $13,000 had previously been established by Plitt in relation to these accounts.
Make the journal entry necessary on Plitt's books to record the factoring of the accounts.
Question 2. On January 2, 2007, Picard Enterprises issued $2,400,000 of 8 percent, 15-year semi-annual coupon bonds to yield 7.5 percent. Each bond is convertible into 40 shares of $15 par common stock, which was trading at $20 per share on the date of the bond issue. The bonds were issued at 106. Without the conversion feature, the bonds would have been issued for 104.5.
On January 3, 2012, all the bonds were converted into common stock. The market price of the stock was $28 per share on the date of the conversion; the issue premium is amortized using the straight-line method.
(1) Provide the journal entry to record the issuance of the bonds.
(2) Provide the journal entry to record the conversion of the bonds assuming Picard considers the conversion
(a) not to be a significant culminating transaction.
(b) to be a significant culminating transaction.
Question 3. On February 1, 2007, Reardon Corporation purchased a parcel of land as a factory site for $320,000. An old building on the property was demolished and construction begun on a new warehouse that was completed April 15, 2008. Costs incurred on the construction project are listed below.
Construction costs $950,000
Demolition of old building 21,000
Architect's fees 31,700
Legal fees/title investigation 4,100
Imputed interest based on stock financing 14,000
Landfill for building site 19,300
Clearing of trees from the building site 9,600
Temporary buildings used for construction activities 29,000
Land survey 4,000
Excavation for basement 13,200
(Salvage materials from demolition sold for $1,800)
(Timber sold for $3,300)
Determine the cost of the land and new building.