| ACC/423 WileyPLUS Assignment: Week 2 Assignment |
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| Exercise 15-6 |
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| Lindsey Hunter Corporation is authorized to issue 50,000 shares of $5 par value common stock. During 2014, Lindsey Hunter took part in the following selected transactions. |
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| Prepare the journal entry to record item 3 using the cost method. |
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| (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.) |
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| Exercise 15-14 |
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| The stockholders’ equity accounts of G.K. Chesterton Company have the following balances on December 31, 2014. |
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| Common stock, $10 par, 300,000 shares issued and outstanding |
$3,000,000 | |||||||||||||||||||||||||||||||||||||||||||
| Paid-in capital in excess of par—common stock |
12,00,000 | |||||||||||||||||||||||||||||||||||||||||||
| Retained earnings |
56,00,000 | |||||||||||||||||||||||||||||||||||||||||||
| Shares of G.K. Chesterton Company stock are currently selling on the Midwest Stock Exchange at $37. |
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| Prepare the appropriate journal entries for each of the following cases. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.) |
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Account Titles and Explanation | Debit | Credit | |||||||||||||||||||||||||||||||||||||||||
| (a) (1) | ||||||||||||||||||||||||||||||||||||||||||||
| (a) (2) | ||||||||||||||||||||||||||||||||||||||||||||
| (b) (1) | ||||||||||||||||||||||||||||||||||||||||||||
| (b) (2) | ||||||||||||||||||||||||||||||||||||||||||||
| (c) (1) | ||||||||||||||||||||||||||||||||||||||||||||
| (c) (2) | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise 16-2 |
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| Aubrey Inc. issued $4,000,000 of 10%, 10-year convertible bonds on June 1, 2014, at 98 plus accrued interest. The bonds were dated April 1, 2014, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. |
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| On April 1, 2015, $1,500,000 of these bonds were converted into 30,000 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. |
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| Prepare the entry to record the conversion on April 1, 2015. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made. |
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| (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. $3,500.) |
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| No. | Account Titles and Explanation | Debit | Credit | |||||||||||||||||||||||||||||||||||||||||
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| (b) | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise 16-7 |
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| Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $136,000, and the value of the warrants in the market is $24,000. The bonds sold in the market at issuance for $152,000. |
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| (a) What entry should be made at the time of the issuance of the bonds and warrants?(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.) |
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Debit | Credit | ||||||||||||||||||||||||||||||||||||||||||
| (b) Prepare the entry if the warrants were nondetachable.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.) |
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| Account Titles and Explanation |
Debit | Credit | ||||||||||||||||||||||||||||||||||||||||||
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| Exercise 16-7 (Essay) |
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| Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $136,000, and the value of the warrants in the market is $24,000. The bonds sold in the market at issuance for $152,000. |
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| If the warrants were nondetachable, would the entries be different? Discuss. |
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| Exercise 17-2 |
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| On January 1, 2013, Dagwood Company purchased at par 12% bonds having a maturity value of $300,000. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. The bonds are classified in the held-to-maturity category. |
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| Prepare the journal entry to record the interest received for 2014. |
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| (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.) |
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| No. | Date | Account Titles and Explanation | Debit | Credit | ||||||||||||||||||||||||||||||||||||||||
| Dec. 31, 2014 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise 17-7 |
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| On December 21, 2013, Bucky Katt Company provided you with the following information regarding its trading securities. |
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| December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||||||
| Investments (Trading) |
Cost | Fair Value | Unrealized Gain (Loss) | |||||||||||||||||||||||||||||||||||||||||
| Clemson Corp. stock |
$20,000 | $19,000 | $(1,000 | ) | ||||||||||||||||||||||||||||||||||||||||
| Colorado Co. stock |
10,000 | 9,000 | (1,000 | ) | ||||||||||||||||||||||||||||||||||||||||
| Buffaloes Co. stock |
20,000 | 20,600 | 600 | |||||||||||||||||||||||||||||||||||||||||
| Total of portfolio |
$50,000 | $48,600 | (1,400 | ) | ||||||||||||||||||||||||||||||||||||||||
| Previous fair value adjustment balance |
0 | |||||||||||||||||||||||||||||||||||||||||||
| Fair value adjustment—Cr. |
$(1,400 | ) | ||||||||||||||||||||||||||||||||||||||||||
| During 2014, Colorado Company stock was sold for $9,400. The fair value of the stock on December 31, 2014, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. |
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| Prepare the adjusting journal entry needed on December 31, 2014. |
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