Description Instructions Complete the following Week 3 Assignme.docx

Description / Instructions:
Complete the following Week 3 Assignment in WileyPLUS: *
Problem 9-7A * Exercise 10-5 * Exercise 10-8 * Exercise 10-13
* Exercise 10-22 * Exercise 10-24 * BYP 10-1 * BYP 10-2 *
Problem 10-9A * Problem 10-13A * IFRS 10-4
Exercise 10-5
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Question 1
During the month of March, Olinger Company’s employees
earned wages of $64,000. Withholdings related to these wages
were $4,896 for Social Security (FICA), $7,500 for federal
income tax, $3,100 for state income tax, and $400 for union
dues. The company incurred no cost related to these earnings
for federal unemployment tax but incurred $700 for state
unemployment tax.
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Prepare the necessary March 31 journal entry to record salaries
and wages expense and salaries and wages payable. Assume that
wages earned during March will be paid during April.
(Credit account titles are automatically indented when amount
is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Mar. 31
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Prepare the entry to record the company’s payroll tax expense.
Date
Debit

Credit
Mar. 31
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Exercise 10-8
Question 2
On August 1, 2014, Ortega Corporation issued
$600,000, 7%, 10-year bonds at face value. Interest is payable
annually on August 1. Ortega’s year-end is December 31.
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Prepare journal entries to record the issuance of the bonds.
Date
Debit
Credit
Aug. 1
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Prepare journal entries to record the accrual of interest on
December 31, 2014.
Date
Debit
Credit
Dec. 31
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Prepare journal entries to record the payment of interest on
August 1, 2015.
Date
Debit
Credit
Aug. 1
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Exercise 10-13
Question 3
Romine Company issued $350,000 of 8%, 20-year bonds on
January 1, 2014, at face value. Interest is payable annually on
January 1.
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Prepare the journal entries to record the issuance of the bonds.
Date
Debit
Credit
Jan. 1, 2014
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Prepare the journal entries to record the accrual of interest on
December 31, 2014.
Date
Debit
Credit
Dec. 31, 2014
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Prepare the journal entries to record the payment of interest on
January 1, 2015.
Date

Debit
Credit
Jan. 1, 2015
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Prepare the journal entries to record the redemption of the
bonds at maturity, assuming interest for the last interest period
has been paid and recorded.
Date
Debit
Credit
Jan. 1, 2034
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Exercise 10-22
Question 4
Cole Corporation issued $400,000, 7%, 20-year bonds on
January 1, 2014, for $360,727. This price resulted in an
effective-interest rate of 8% on the bonds. Interest is payable
annually on January 1. Cole uses the effective-interest method
to amortize bond premium or discount.
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Prepare the schedule using effective-interest method to amortize
bond premium or discount of Cole Corporation.
(Round answers to 0 decimal places, e.g. 125.)
Interest
Periods
Interest to
Be Paid
Interest Expense

to Be Recorded
Discount
Amortization
Unamortized
Discount
Bond
Carrying Value
Issue date
$
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Prepare the journal entries to record the issuance of the bonds.
(Round answers to 0 decimal places, e.g. 125. Credit account
titles are automatically indented when amount is entered. Do
not indent manually.)
Date
Debit
Credit
Jan. 1, 2014
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Prepare the journal entries to record the accrual of interest and
the discount amortization on December 31, 2014.
Date
Debit
Credit
Dec. 31, 2014
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Prepare the journal entries to record the payment of interest on
January 1, 2015.
Date
Debit
Credit
Jan. 1, 2015
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Exercise 10-24
Question 5
Nance Co. receives $280,000 when it issues a $280,000, 6%,

mortgage note payable to finance the construction of a building
at December 31, 2014. The terms provide for semiannual
installment payments of $14,285 on June 30 and December 31.
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Prepare the schedule using effective-interest method to amortize
bond premium or discount of Nance Co.
Semiannual
Interest
Period
Cash
Payment
Interest
Expense
Reduction
of Principal
Principal
Balance
Issue date
$
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$
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$
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$
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6/30/15
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Prepare the journal entries to record the mortgage loan.

Date
Debit
Credit
Dec. 31, 2014
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Prepare the journal entries to record the first two installment
payments.
Date
Debit
Credit
First Installment Payment
June 30, 2015
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Second Installment Payment
Dec. 31, 2015
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Broadening Your Perspective 10-1
Question 6
The financial statements of
Tootsie Roll

are presented below.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in
thousands except per share data)
For the year ended December 31,
2011
2010
2009
Net product sales
$528,369
$517,149
$495,592
Rental and royalty revenue
4,136

4,299
3,739
Total revenue
532,505
521,448
499,331
Product cost of goods sold
365,225
349,334
319,775
Rental and royalty cost
1,038

1,088
852
Total costs
366,263
350,422
320,627
Product gross margin
163,144
167,815
175,817
Rental and royalty gross margin
3,098

3,211
2,887
Total gross margin
166,242
171,026
178,704
Selling, marketing and administrative expenses
108,276
106,316
103,755
Impairment charges
—

—
14,000
Earnings from operations
57,966
64,710
60,949
Other income (expense), net
2,946
8,358
2,100
Earnings before income taxes
60,912

73,068
63,049
Provision for income taxes
16,974
20,005
9,892
Net earnings
$43,938
$53,063
$53,157

Net earnings
$43,938
$53,063
$53,157
Other comprehensive earnings (loss)
(8,740
)
1,183
2,845
Comprehensive earnings
$35,198

$54,246
$56,002
Retained earnings at beginning of year.
$135,866
$147,687
$144,949
Net earnings
43,938

53,063
53,157
Cash dividends
(18,360
)
(18,078
)
(17,790
)
Stock dividends
(47,175
)
(46,806
)
(32,629
)
Retained earnings at end of year
$114,269

$135,866
$147,687
Earnings per share
$0.76
$0.90
$0.89

Average Common and Class B Common shares outstanding
57,892
58,685
59,425
(The accompanying notes are an integral part of these
statements.)
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in
Assets
December 31,
2011

2010
CURRENT ASSETS:
Cash and cash equivalents
$78,612
$115,976
Investments
10,895
7,996
Accounts receivable trade, less allowances of $1,731 and $1,531

41,895
37,394
Other receivables
3,391
9,961
Inventories:
Finished goods and work-in-process
42,676
35,416

Raw materials and supplies
29,084
21,236
Prepaid expenses
5,070
6,499
Deferred income taxes
578
689
Total current assets
212,201

235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land
21,939
21,696
Buildings
107,567
102,934
Machinery and equipment

322,993
307,178
Construction in progress
2,598
9,243
455,097
440,974
Less—Accumulated depreciation
242,935
225,482

Net property, plant and equipment
212,162
215,492
OTHER ASSETS:
Goodwill
73,237
73,237
Trademarks
175,024

175,024
Investments
96,161
64,461
Split dollar officer life insurance
74,209
74,441
Prepaid expenses
3,212
6,680

Equity method investment
3,935
4,254
7,715
9,203
Total other assets
433,493
407,300
Total assets
$857,856
$857,959

Liabilities and Shareholders’ Equity
December 31,
2011
2010
CURRENT LIABILITIES:
Accounts payable
$10,683
$9,791

Dividends payable
4,603
4,529
Accrued liabilities
43,069
44,185
Total current liabilities
58,355
58,505
NONCURRENT LIABILITES:

43,521
47,865
Postretirement health care and life insurance benefits
26,108
20,689
Industrial development bonds
7,500
7,500
Liability for uncertain tax positions
8,345

9,835
Deferred compensation and other liabilities
48,092
46,157
Total noncurrent liabilities
133,566
132,046
SHAREHOLDERS’ EQUITY:

Common stock, $.69-4/9 par value—120,000 shares
authorized—36,479 and 36,057 respectively, issued
25,333
25,040
Class B common stock, $.69-4/9 par value—40,000 shares
14,601
14,212
Capital in excess of par value
533,677
505,495
Retained earnings, per accompanying statement
114,269

135,866
Accumulated other comprehensive loss
(19,953
)
(11,213
)
Treasury stock (at cost)—71 shares and 69 shares, respectively
(1,992
)
(1,992
)
Total shareholders’ equity
665,935
667,408

Total liabilities and shareholders’ equity
$857,856
$857,959
Cash Flows (in thousands)
2011
2010
2009
CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings
$43,938
$53,063
$53,157
Adjustments to reconcile net earnings to net cash provided by
operating activities:

Depreciation
19,229
18,279
17,862
Impairment charges
—
—
14,000
Impairment of equity method investment

—
—
4,400
Loss from equity method investment
194
342
233
Amortization of marketable security premiums
1,267
522

320
Changes in operating assets and liabilities:
Accounts receivable
(5,448
)
717
(5,899
)

Other receivables
3,963
(2,373
)
(2,088
)
Inventories
(15,631
)
(1,447
)
455
Prepaid expenses and other assets
5,106

4,936
5,203
Accounts payable and accrued liabilities
84
2,180
(2,755
)
Income taxes payable and deferred
(5,772
)
2,322
(12,543
)

2,022
1,429
1,384
2,146
2,525
2,960
Others

(708
)
310
305
Net cash provided by operating activities
50,390
82,805
76,994
CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures
(16,351
)
(12,813
)
(20,831
)
Net purchase of trading securities
(3,234
)
(2,902
)
(1,713
)
Purchase of available for sale securities

(39,252
)
(9,301
)
(11,331
)
Sale and maturity of available for sale securities
7,680
8,208
17,511
Net cash used in investing activities
(51,157
)
(16,808
)

(16,364
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired
(18,190
)
(22,881
)
(20,723
)
Dividends paid in cash

(18,407
)
(18,130
)
(17,825
)
Net cash used in financing activities
(36,597
)
(41,011
)
(38,548
)
Increase (decrease) in cash and cash equivalents
(37,364
)
24,986
22,082

Cash and cash equivalents at beginning of year
115,976
90,990
68,908
Cash and cash equivalents at end of year
$78,612
$115,976
$90,990
Supplemental cash flow information

Income taxes paid
$16,906
$20,586
$22,364
Interest paid
$38
$49
$182

Stock dividend issued
$47,053
$46,683
$32,538
statements.)
Answer the following questions.
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What were Tootsie Roll’s total current liabilities at December
31, 2011?
(Enter amount in thousands.)
Current liabilities as at December 31, 2011
$
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What was the increase/decrease in Tootsie Roll’s total current
liabilities from the prior year?

Change in current liabilities
$
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How much were the accounts payable at December 31, 2011?
Accounts payable
$
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Broadening Your Perspective 10-2
Question 7
The financial statements of
The Hershey Company
and
Tootsie Roll

are presented below.
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
2011
2010
2009
In thousands of dollars except per share amounts
Net Sales
$6,080,788
$5,671,009
$5,298,668
Costs and Expenses:

Cost of sales
3,548,896
3,255,801
3,245,531
Selling, marketing and administrative
1,477,750
1,426,477
1,208,672
Business realignment and impairment (credits) charges, net
(886
)
83,433

82,875
Total costs and expenses
5,025,760
4,765,711
4,537,078
Income before Interest and Income Taxes
1,055,028
905,298
761,590
Interest expense, net
92,183
96,434
90,459
Income before Income Taxes
962,845

808,864
671,131
333,883
299,065
235,137
Net Income
$628,962
$509,799
$435,994
Net Income Per Share—Basic—Class B Common Stock
$2.58
$2.08
$1.77

Net Income Per Share—Diluted—Class B Common Stock
$2.56
$2.07
$1.77
Net Income Per Share—Basic—Common Stock
$2.85
$2.29
$1.97
Net Income Per Share—Diluted—Common Stock
$2.74
$2.21
$1.90
Cash Dividends Paid Per Share:

Common Stock
$1.3800
$1.2800
$1.1900
Class B Common Stock
1.2500
1.1600
1.0712
The notes to consolidated financial statements are an integral
part of these statements and are included in the Hershey's 2011
Annual Report, available at www.thehersheycompany.com.
THE HERSHEY COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,

2011
2010
In thousands of dollars
ASSETS
Current Assets:
$693,686

$884,642
Accounts receivable—trade
399,499
390,061
Inventories
648,953
533,622
136,861
55,760
Prepaid expenses and other
167,559

141,132
2,046,558
2,005,217
Property, Plant and Equipment, Net
1,559,717
1,437,702
Goodwill
516,745
524,134
Other Intangibles
111,913

123,080
Deferred Income Taxes
38,544
21,387
Other Assets
138,722
161,212
Total assets
$4,412,199
$4,272,732
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable
$420,017
$410,655
Accrued liabilities
612,186
593,308
Accrued income taxes
1,899

9,402
Short-term debt
42,080
24,088
Current portion of long-term debt
97,593
261,392
1,173,775
1,298,845
Long-term Debt
1,748,500

1,541,825
Other Long-term Liabilities
617,276
494,461
Total liabilities
3,539,551
3,335,131
Commitments and Contingencies
—
—
Stockholders’ Equity:

The Hershey Company Stockholders’ Equity
Preferred Stock, shares issued: none in 2011 and 2010
—
—
Common Stock, shares issued: 299,269,702 in 2011 and
299,195,325 in 2010
299,269
299,195
Class B Common Stock, shares issued: 60,632,042 in 2011
and 60,706,419 in 2010

60,632
60,706
Additional paid-in capital
490,817
434,865
Retained earnings
4,699,597
4,374,718
Treasury—Common Stock shares, at cost: 134,695,826 in
2011 and 132,871,512 in 2010
(4,258,962
)
(4,052,101
)

(442,331
)
(215,067
)
The Hershey Company stockholders’ equity
849,022
902,316
Noncontrolling interests in subsidiaries
23,626
35,285
Total stockholders’ equity
872,648
937,601
Total liabilities and stockholders’equity

$4,412,199
$4,272,732
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
2011
2010
2009
In thousands of dollars
Cash Flows Provided from (Used by) Operating Activities

Net income
$628,962
$509,799
$435,994
Adjustments to reconcile net income to net cash provided from
operations:

Depreciation and amortization
215,763
197,116
182,411
Stock-based compensation expense, net of tax of $15,127,
$17,413 and $19,223, respectively
28,341
32,055
34,927
Excess tax benefits from stock-based compensation
(13,997
)
(1,385
)

(4,455
)
33,611
(18,654
)
(40,578
)
Gain on sale of trademark licensing rights, net of tax of $5,962
(11,072
)
—
—
Business realignment and impairment charges, net of tax of
$18,333, $20,635 and $38,308, respectively
30,838

77,935
60,823
Contributions to pension plans
(8,861
)
(6,073
)
(54,457
)
Changes in assets and liabilities, net of effects from business
acquisitions and divestitures:

Accounts receivable—trade
(9,438
)
20,329
46,584
Inventories
(115,331
)
(13,910
)
74,000
Accounts payable
7,860
90,434
37,228

Other assets and liabilities
(205,809
)
13,777
293,272
Net Cash Provided from Operating Activities
580,867
901,423
1,065,749
Cash Flows Provided from (Used by) Investing Activities

Capital additions
(323,961
)
(179,538
)
(126,324
)
Capitalized software additions
(23,606
)
(21,949
)
(19,146
)
Proceeds from sales of property, plant and equipment
312
2,201

10,364
Proceeds from sales of trademark licensing rights
20,000
—
—
Business acquisitions
(5,750
)
—
(15,220
)
Net Cash (Used by) Investing Activities
(333,005
)

(199,286
)
(150,326
)
Cash Flows Provided from (Used by) Financing Activities
Net change in short-term borrowings
10,834
1,156
(458,047
)
Long-term borrowings

249,126
348,208
—
Repayment of long-term debt
(256,189
)
(71,548
)
(8,252
)
Proceeds from lease financing agreement
47,601
—
—

Cash dividends paid
(304,083
)
(283,434
)
(263,403
)
Exercise of stock options
184,411
92,033
28,318
Excess tax benefits from stock-based compensation
13,997
1,385
4,455

Contributions from noncontrolling interests in subsidiaries
—
10,199
7,322
Repurchase of Common Stock
(384,515
)
(169,099
)
(9,314
)
Net Cash (Used by) Financing Activities
(438,818
)
(71,100
)

(698,921
)
(Decrease) Increase in Cash and Cash Equivalents
(190,956
)
631,037
216,502
Cash and Cash Equivalents as of January 1
884,642
253,605
37,103
Cash and Cash Equivalents as of December 31
$693,686
$884,642

$253,605
Interest Paid
$97,892
$97,932
$91,623
Income Taxes Paid
292,315
350,948
252,230
Earnings, Comprehensive Earnings and Retained Earnings (in

2011
2010
2009
Net product sales
$528,369
$517,149
$495,592
Rental and royalty revenue
4,136
4,299
3,739
Total revenue

532,505
521,448
499,331
Product cost of goods sold
365,225
349,334
319,775
Rental and royalty cost
1,038
1,088
852
Total costs

366,263
350,422
320,627
Product gross margin
163,144
167,815
175,817
Rental and royalty gross margin
3,098
3,211
2,887
Total gross margin

166,242
171,026
178,704
Selling, marketing and administrative expenses
108,276
106,316
103,755
Impairment charges
—
—
14,000
Earnings from operations

57,966
64,710
60,949
Other income (expense), net
2,946
8,358
2,100
Earnings before income taxes
60,912
73,068
63,049

16,974
20,005
9,892
Net earnings
$43,938
$53,063
$53,157
Net earnings

$43,938
$53,063
$53,157
Other comprehensive earnings (loss)
(8,740
)
1,183
2,845
Comprehensive earnings
$35,198
$54,246
$56,002

Retained earnings at beginning of year.
$135,866
$147,687
$144,949
Net earnings
43,938
53,063
53,157
Cash dividends

(18,360
)
(18,078
)
(17,790
)
Stock dividends
(47,175
)
(46,806
)
(32,629
)
Retained earnings at end of year
$114,269
$135,866
$147,687

Earnings per share
$0.76
$0.90
$0.89
Average Common and Class B Common shares outstanding

57,892
58,685
59,425
statements.)
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in
Assets
December 31,
2011
2010
CURRENT ASSETS:

$78,612
$115,976
Investments
10,895
7,996
Accounts receivable trade, less allowances of $1,731 and $1,531
41,895
37,394
Other receivables

3,391
9,961
Inventories:
Finished goods and work-in-process
42,676
35,416
Raw materials and supplies
29,084
21,236

Prepaid expenses
5,070
6,499
578
689
212,201
235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:

Land
21,939
21,696
Buildings
107,567
102,934
Machinery and equipment
322,993
307,178

Construction in progress
2,598
9,243
455,097
440,974
Less—Accumulated depreciation
242,935
225,482
Net property, plant and equipment
212,162
215,492

OTHER ASSETS:
Goodwill
73,237
73,237
Trademarks
175,024
175,024
Investments
96,161

64,461
Split dollar officer life insurance
74,209
74,441
Prepaid expenses
3,212
6,680
Equity method investment
3,935
4,254

7,715
9,203
Total other assets
433,493
407,300
Total assets
$857,856
$857,959
Liabilities and Shareholders’ Equity
December 31,

2011
2010
CURRENT LIABILITIES:
Accounts payable
$10,683
$9,791
Dividends payable
4,603
4,529

Accrued liabilities
43,069
44,185
58,355
58,505
NONCURRENT LIABILITES:
43,521
47,865

26,108
20,689
Industrial development bonds
7,500
7,500
Liability for uncertain tax positions
8,345
9,835

48,092
46,157
Total noncurrent liabilities
133,566
132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares
25,333
25,040

Class B common stock, $.69-4/9 par value—40,000 shares
14,601
14,212
Capital in excess of par value
533,677
505,495
Retained earnings, per accompanying statement
114,269
135,866
(19,953

)
(11,213
)
Treasury stock (at cost)—71 shares and 69 shares, respectively
(1,992
)
(1,992
)
Total shareholders’ equity
665,935
667,408
Total liabilities and shareholders’ equity
$857,856
$857,959

Cash Flows (in thousands)
2011
2010
2009
CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings
$43,938
$53,063
$53,157
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation
19,229

18,279
17,862
Impairment charges
—
—
14,000
Impairment of equity method investment
—
—
4,400

Loss from equity method investment
194
342
233
Amortization of marketable security premiums
1,267
522
320
Changes in operating assets and liabilities:

Accounts receivable
(5,448
)
717
(5,899
)
Other receivables
3,963
(2,373
)

(2,088
)
Inventories
(15,631
)
(1,447
)
455
Prepaid expenses and other assets
5,106
4,936
5,203

Accounts payable and accrued liabilities
84
2,180
(2,755
)
Income taxes payable and deferred
(5,772
)
2,322
(12,543
)
2,022

1,429
1,384
2,146
2,525
2,960
Others
(708
)
310
305

Net cash provided by operating activities
50,390
82,805
76,994
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(16,351
)

(12,813
)
(20,831
)
Net purchase of trading securities
(3,234
)
(2,902
)
(1,713
)
Purchase of available for sale securities
(39,252
)
(9,301
)
(11,331
)

Sale and maturity of available for sale securities
7,680
8,208
17,511
Net cash used in investing activities
(51,157
)
(16,808
)
(16,364
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Shares repurchased and retired
(18,190
)
(22,881
)
(20,723
)
Dividends paid in cash
(18,407
)
(18,130
)
(17,825
)

Net cash used in financing activities
(36,597
)
(41,011
)
(38,548
)
Increase (decrease) in cash and cash equivalents
(37,364
)
24,986
22,082
Cash and cash equivalents at beginning of year
115,976

90,990
68,908
Cash and cash equivalents at end of year
$78,612
$115,976
$90,990
Supplemental cash flow information

Income taxes paid
$16,906
$20,586
$22,364
Interest paid
$38
$49
$182
Stock dividend issued
$47,053
$46,683

$32,538
statements.)
NOTE 6—OTHER INCOME (EXPENSE), NET:
Other income (expense), net is comprised of the following:
2011
2010
2009
Interest and dividend income
$1,087
$879
$1,439
Gains (losses) on trading securities relating to deferred
compensation plans
29
3,364
4,524

Interest expense
(121)
(142)
(243)
Impairment of equity method investment.
_
_
(4,400)
Equity method investment loss
(194)
(342)
(233)
Foreign exchange gains (losses)
2,098
4,090
951
Capital gains (losses)
(277)

(28)
(38)
Miscellaneous, net
274
537
100
$2,946
$8,358
$2,100
As of December 31, 2009, management determined that the
carrying value of an equity method investment was impaired as
a result of accumulated losses from operations and review of
future expectations. The Company recorded a pre-tax
impairment charge of $4,400 resulting in an adjusted carrying
value of $4,961 as of December 31, 2009. The fair value was
primarily assessed using the present value of estimated future
cash flows.
Warning
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Based on the information contained in these financial
statements, compute the current ratio for 2011 for each
company.
(Round answers to 2 decimal places, e.g. 15.25.)
Hershey
Tootsie Roll
Current ratio
[removed]
: 1
[removed]
:1
Warning
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Based on the information contained in these financial
statements, compute the following 2011 ratios for each
company.
(Round answers to 1 decimal places, e.g. 15.2% or 15.2 times.)
(1)
Debt to assets.
(2)
Times interest earned. (Hershey’s total interest expense for
2011 was $94,780,000. See Tootsie Roll’s Note 6 for its interest
expense.)

Hershey
Tootsie Roll
Debt to assets
[removed]
%
[removed]
%
Times interest earned
[removed]
times
[removed]
times
Warning
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Problem 9-7A
Question 8
In recent years, Farr Company has purchased three machines.

Because of frequent employee turnover in the accounting
department, a different accountant was in charge of selecting
the depreciation method for each machine, and various methods
have been used. Information concerning the machines is
summarized in the table below.
Machine
Acquired
Cost
Salvage
Value
Useful Life
(in years)
Depreciation
Method
1
Jan. 1, 2012
$96,000
$12,000
8
Straight-line
2
July 1, 2013
85,000

10,000
5
Declining-balance
3
Nov. 1, 2013
66,000
6,000
6
Units-of-activity
For the declining-balance method, Farr Company uses the
double-declining rate. For the units-of-activity method, total
machine hours are expected to be 30,000. Actual hours of use in
the first 3 years were: 2013, 800; 2014, 4,500; and 2015, 6,000.
Warning
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Compute the amount of accumulated depreciation on each
machine at December 31, 2015.
MACHINE 1
MACHINE 2

MACHINE 3
Accumulated Depreciation at December 31
$
[removed]
$
[removed]
$
[removed]
Warning
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If machine 2 was purchased on April 1 instead of July 1, what
would be the depreciation expense for this machine in 2013? In
2014?
2013
2014
Depreciation Expense
$
[removed]
$
[removed]
Warning

Ok
Cancel
Problem 10-9A
Question 9
Wempe Co. sold $3,000,000, 8%, 10-year bonds on January 1,
2014. The bonds were dated January 1, 2014, and pay interest
on January 1. The company uses straight-line amortization on
bond premiums and discounts. Financial statements are prepared
annually.
Warning
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Prepare the journal entries to record the issuance of the bonds
assuming they sold at: (1) 103 and (2) 98.
No.
Date
Debit
Credit
1.
1/1/14
[removed]

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
2.
1/1/14
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
Warning
Ok
Cancel
Prepare amortization tables for issuance of the bonds sold

at 103 for the first three interest payments.
Annual
Interest
Periods
Interest to
Be Paid
Interest Expense
to Be Recorded
Premium
Amortization
Unamortized
Premium
Bond
Carrying Value
Issue date
$
[removed]
$
[removed]
$
[removed]
$
[removed]
$
[removed]
1

[removed]
[removed]
[removed]
[removed]
[removed]
2
[removed]
[removed]
[removed]
[removed]
[removed]
3
[removed]
[removed]
[removed]
[removed]
[removed]
Prepare amortization tables for issuance of the bonds sold
at 98 for the first three interest payments.
Annual
Interest

Periods
Interest to
Be Paid
Interest Expense
to Be Recorded
Premium
Amortization
Unamortized
Premium
Bond
Carrying Value
Issue date
$
[removed]
$
[removed]
$
[removed]
$
[removed]
$
[removed]
1
[removed]

[removed]
[removed]
[removed]
[removed]
2
[removed]
[removed]
[removed]
[removed]
[removed]
3
[removed]
[removed]
[removed]
[removed]
[removed]
Warning
Ok
Cancel

Prepare the journal entries to record interest expense for 2014
under both of the bond issuances assuming they sold at:
(1) 103 and (2) 98.
No.
Date
Debit
Credit
1.
12/31/14
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
2.
12/31/14
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]

[removed]
[removed]
[removed]
Warning
Ok
Cancel
Show the long-term liabilities balance sheet presentation for
issuance of the bonds sold at 103 at December 31, 2014.
WEMPE Co.
Balance Sheet (Partial)
December 31, 2014
[removed]
[removed]
$
[removed]
[removed]
:
[removed]

[removed]
$
[removed]
Show the long-term liabilities balance sheet presentation for
issuance of the bonds sold at 98 at December 31, 2014.
WEMPE Co.
December 31, 2014
[removed]
[removed]
$
[removed]
[removed]
:
[removed]
[removed]
$
[removed]

Warning
Ok
Cancel
Problem 10-13A
Question 10
Grace Herron has just approached a venture capitalist for
financing for her new business venture, the development of a
local ski hill. On July 1, 2013, Grace was loaned $150,000 at an
annual interest rate of 7%. The loan is repayable over 5 years in
annual installments of $36,584, principal and interest, due each
June 30. The first payment is due June 30, 2014. Grace uses the
effective-interest method for amortizing debt. Her ski hill
company’s year-end will be June 30.
Warning
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Prepare an amortization schedule for the 5 years, 2013–2018.
Period
Cash
Payment

Interest
Expense
Principal
Reduction
Balance
July 1, 2013
$
[removed]
$
[removed]
$
[removed]
$
[removed]
June 30, 2014
[removed]
[removed]
[removed]
[removed]
June 30, 2015
[removed]

[removed]
[removed]
[removed]
June 30, 2016
[removed]
[removed]
[removed]
[removed]
June 30, 2017
[removed]
[removed]
[removed]
[removed]
June 30, 2018
[removed]
[removed]
[removed]
[removed]

*
*
Amount may be off due to rounding.
Warning
Ok
Cancel
Prepare all journal entries for Grace Herron for the first 2 fiscal
years ended June 30, 2014, and June 30, 2015.
Date
Debit
Credit
July 1/13
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
June 30/14
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]

[removed]
[removed]
[removed]
June 30/15
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
Warning
Ok
Cancel
Show the balance sheet presentation of the note payable as of
June 30, 2015. (
Hint:
Be sure to distinguish between the current and long-term
portions of the note.)
GRACE HERRON
June 30, 2015
[removed]

[removed]
$
[removed]
[removed]
[removed]
$
[removed]
Warning
Ok
Cancel
IFRS 10-4
Question 11
Ratzlaff Company issues €2 million, 10-year, 8% bonds at 97,
with interest payable on July 1 and January 1.
Warning
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Prepare the journal entry to record the sale of these bonds on
January 1, 2014.
(Credit account titles are automatically indented when the
amount is entered. Do not indent manually.)
Date
Debit
Credit
Jan. 1
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
Warning
Ok
Cancel
Assuming instead that the above bonds sold for 104, prepare the
journal entry to record the sale of these bonds on January 1,
2014.
(Credit account titles are automatically indented when the
amount is entered. Do not indent manually.)
Date
Debit
Credit
Jan. 1

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
Warning
Ok
Cancel

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