Accounting II
Test #2
QUESTION #1
On January 1, 2008, Kohl Corporation issued $700,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Kohl Corporation has a calendar year end.
Instructions
Prepare all entries related to the bond issue for 2008.
QUESTION #2
Presented below are three independent situations:
(a)
Howell Corporation purchased $250,000 of its bonds on June 30, 2008, at 102 and immediately retired them. The carrying value of the bonds on the retirement date was $229,500. The bonds pay semiannual interest and the interest payment due on June 30, 2008, has been made and recorded.
(b)
Justice, Inc. purchased $200,000 of its bonds at 97 on June 30, 2008, and immediately retired them. The carrying value of the bonds on the retirement date was $196,500. The bonds pay semiannual interest and the interest payment due on June 30, 2008, has been made and recorded.
(c)
Starr Company has $80,000, 10%, 12-year convertible bonds outstanding. These bonds were sold at face value and pay semiannual interest on June 30 and December 31 of each year. The bonds are convertible into 40 shares of Starr $5 par value common stock for each $1,000 par value bond. On December 31, 2008, after the bond interest has been paid, $30,000 par value of bonds were converted. The market value of Starr's common stock was $38 per share on December 31, 2008.
Instructions
For each of the independent situations, prepare the journal entry to record the retirement or conversion of the bonds.
QUESTION #3
Unruh Company issued $900,000, 10%, 20-year bonds on January 1, 2008, at 104. Interest is payable semiannually on July 1 and January 1. Unruh uses the straight-line method of amortization and has a calendar year end.
Instructions
Prepare the January 1, 2008 and the July 1, 2008 journal entries related to the bond issue.
QUESTION #4
Karly Company issued $250,000, 11%, 10-year bonds on December 31, 2008, for $230,000. Interest is payable semiannually on June 30 and December 31. Karly uses the straight-line method of amortization and has a calendar year end.
Instructions
Prepare the appropriate journal entries on
(a)
December 31, 2008.
(b)
June 30, 2009.
QUESTION #5
The adjusted trial balance for Payne Corporation at the end of the current year contained the following accounts:
Bonds payable, 10%
$800,000
Bond interest payable
20,000
Discount on bonds payable
40,000
Lease liability
60,000
Mortgage notes payable, 9%, due 2018
80,000
Accounts payable
120,000
Instructions
(a)
Prepare the long-term liabilities section of the balance sheet.
(b)
Indicate the proper balance sheet classification for the accounts listed above that do not belong in the long-term liabilities section.
QUESTION #6
Glaser Company had the following transactions pertaining to debt securities held as a short-term investment.
Jan.
1
Purchased 40, 8%, $1,000 Cotter Company bonds for $40,000 cash plus brokerage fees of $800. Interest i.
Organic Name Reactions for the students and aspirants of Chemistry12th.pptx
Accounting IITest #2QUESTION #1On January 1, 2008, Kohl .docx
1. Accounting II
Test #2
QUESTION #1
On January 1, 2008, Kohl Corporation issued $700,000, 8%, 10-
year bonds at face value. Interest is payable semiannually on
July 1 and January 1. Kohl Corporation has a calendar year end.
Instructions
Prepare all entries related to the bond issue for 2008.
QUESTION #2
Presented below are three independent situations:
(a)
Howell Corporation purchased $250,000 of its bonds on June
30, 2008, at 102 and immediately retired them. The carrying
value of the bonds on the retirement date was $229,500. The
bonds pay semiannual interest and the interest payment due on
June 30, 2008, has been made and recorded.
(b)
Justice, Inc. purchased $200,000 of its bonds at 97 on June 30,
2008, and immediately retired them. The carrying value of the
bonds on the retirement date was $196,500. The bonds pay
semiannual interest and the interest payment due on June 30,
2008, has been made and recorded.
(c)
Starr Company has $80,000, 10%, 12-year convertible bonds
outstanding. These bonds were sold at face value and pay
semiannual interest on June 30 and December 31 of each year.
The bonds are convertible into 40 shares of Starr $5 par value
2. common stock for each $1,000 par value bond. On December
31, 2008, after the bond interest has been paid, $30,000 par
value of bonds were converted. The market value of Starr's
common stock was $38 per share on December 31, 2008.
Instructions
For each of the independent situations, prepare the journal entry
to record the retirement or conversion of the bonds.
QUESTION #3
Unruh Company issued $900,000, 10%, 20-year bonds on
January 1, 2008, at 104. Interest is payable semiannually on
July 1 and January 1. Unruh uses the straight-line method of
amortization and has a calendar year end.
Instructions
Prepare the January 1, 2008 and the July 1, 2008 journal entries
related to the bond issue.
QUESTION #4
Karly Company issued $250,000, 11%, 10-year bonds on
December 31, 2008, for $230,000. Interest is payable
semiannually on June 30 and December 31. Karly uses the
straight-line method of amortization and has a calendar year
end.
Instructions
Prepare the appropriate journal entries on
(a)
December 31, 2008.
(b)
June 30, 2009.
3. QUESTION #5
The adjusted trial balance for Payne Corporation at the end of
the current year contained the following accounts:
Bonds payable, 10%
$800,000
Bond interest payable
20,000
Discount on bonds payable
40,000
Lease liability
60,000
Mortgage notes payable, 9%, due 2018
80,000
Accounts payable
120,000
Instructions
4. (a)
Prepare the long-term liabilities section of the balance sheet.
(b)
Indicate the proper balance sheet classification for the accounts
listed above that do not belong in the long-term liabilities
section.
QUESTION #6
Glaser Company had the following transactions pertaining to
debt securities held as a short-term investment.
Jan.
1
Purchased 40, 8%, $1,000 Cotter Company bonds for $40,000
cash plus brokerage fees of $800. Interest is payable
semiannually on July 1 and January 1.
July
1
Received semiannual interest on Cotter Company bonds.
Oct.
1
Sold 30 Cotter Company bonds for $32,000 plus accrued
interest less $500 brokerage fees.
Instructions
(a)
Journalize the transactions.
(b)
Prepare the adjusting entry for the accrual of interest on
December 31.
QUESTION #7
The following transactions were made by Waite Company.
Assume all investments are short-term and are readily
5. marketable.
June
2
Purchased 300 shares of Beaty Corporation common stock for
$45 per share.
July
1
Purchased 200 Meng Corporation bonds for $220,000.
30
Received a cash dividend of $2 per share from Beaty
Corporation.
Sept.
15
Sold 90 shares of Beaty Corporation stock for $50 per share.
Dec.
31
Received semiannual interest check for $11,000 from Meng
Corporation.
31
Received a cash dividend of $2 per share from Beaty
Corporation.
Instructions
Journalize the transactions.
QUESTION #8
Stine Corporation's balance sheet at December 31, 2007, showed
the following:
6. Short-term investments, at fair value
$46,500
Stine Corporation's trading portfolio of stock investments
consisted of the following at December 31, 2007:
Stock
Number of Shares
Cost
Dooley Common Stock
200
$30,000
Adler Preferred Stock
400
6,000
Griggs Common Stock
300
9,000
7. $45,000
During 2008, the following transactions took place:
Feb.
5
Sold 50 shares of Dooley common stock for $8,000.
Mar.
30
Purchased 25 shares of Griggs common stock for $950.
Sept.
9
Purchased 50 shares of Griggs common stock for $2,000.
At year end on December 31, 2008, the market values per share
were:
Market Value Per Share
Dooley Common Stock
$158.00
Adler Preferred Stock
$14.00
Griggs Common Stock
$25.00
Instructions
8. (a)
Prepare the journal entries to record the 2008 stock
transactions.
(b)
On December 31, 2008, prepare any adjusting entry that might
be necessary relative to the trading portfolio.
(c)
Show how the stock investments will appear on Stine
Corporation's balance sheet at December 31, 2008.
QUESTION #9
Seely Company purchased 42,000 shares of common stock of
Otto Corporation as a long-term investment for $1,000,000.
During the year, Otto Corporation reported net income of
$300,000 and paid dividends of $100,000.
Instructions
(a)
Assuming that the 42,000 shares represent a 15% interest in
Otto Corporation:
1.
Prepare the journal entry to record the investment in Otto stock.
2.
Prepare any entries that Seely Company should make in
accounting for its investment in Otto stock during the year.
3.
What is the balance of the Stock Investments account on Seely
Company's books at the end of the year?
9. (b) Repeat requirement (a) above except assume that the 42,000
shares represent a 25% interest in Otto Corporation.
QUESTION #10
Rison Corporation has the following trading portfolio of stock
investments as of December 31, 2008.
Security
Cost
Fair Value
A
$19,000
$16,000
B
22,000
26,000
C
34,000
31,000
$75,000
$73,000
On January 22, 2009, Rison Corporation sold security C for
$30,000.
Instructions
(a)
10. Prepare the adjusting entry for Rison Corporation on December
31, 2008, to report the portfolio at fair value.
(b)
Indicate the balance sheet and income statement presentation of
the fair value data for Rison Corporation at December 31, 2008.
(c)
Prepare the journal entry for the 2009 sale.
QUESTION #11
Selected transactions of Eller Company are listed below.
1.
Common stock is sold for cash above par value.
2.
Bonds payable are issued for cash at a discount.
3.
Interest receivable on a short-term note receivable is collected.
4.
Land is sold for cash at book value.
5.
Accounts payable are paid in cash.
6.
Equipment is purchased by signing a 3-year, 10% note payable.
11. 7.
Cash dividends on common stock are declared and paid.
8.
100 shares of XYZ common stock are purchased for cash.
9.
Merchandise is sold to customers for cash.
10.
Bonds payable are converted into common stock.
Instructions
Classify each transaction as either (a) an operating activity, (b)
an investing activity, (c) a financing activity, or (d) a noncash
investing and financing activity.
QUESTION #12
A comparative balance sheet for Lyon Company appears below:
LYON COMPANY
Comparative Balance Sheet
Dec. 31, 2008
Dec. 31, 2007
Assets
Cash
$ 23,000
$10,000
13. 37,000
47,000
Common stock
40,000
23,000
Retained earnings
22,000
10,000
Total liabilities and stockholders' equity
$116,000
$87,000
Additional information:
1.
Net income for the year ending December 31, 2008 was
$24,000.
2.
Cash dividends of $12,000 were declared and paid during the
year.
3.
Long-term investments that had a cost of $18,000 were sold for
$16,000.
4.
Sales for 2008 were $120,000.
Instructions
Prepare a statement of cash flows for the year ended December
31, 2008, using the indirect method.