Cole, Inc., which owes Henry Co. $600,000 in notes payable with accrued interest of $54,000, is in financial difficulty. To settle the debt, Henry agrees to accept from Cole equipment with a fair value of $570,000, an original cost of $840,000, and accumulated depreciation of $195,000.
Instructions
(a) Compute the gain or loss to Cole on the settlement of the debt.
(b) Compute the gain or loss to Cole on the transfer of the equipment.
(c) Prepare the journal entry on Cole's books to record the settlement of this debt.
(d) Prepare the journal entry on Henry's books to record the settlement of the receivable.
Click here for the solution: Cole, Inc., which owes Henry Co. $600,000 in notes payable with accrued interest of $54,000, is in financial difficulty
Showing posts with label accrued. Show all posts
Showing posts with label accrued. Show all posts
Wednesday, April 13, 2016
1. A contingent loss should be reported in a footnote to the financial statements rather than being accrued if: (Points : 1)
MULTIPLE CHOICE
1. A contingent loss should be reported in a footnote to the financial statements rather than being accrued if: (Points : 1)
2. Which of the following investment securities held by Zoogle Inc. may be classified as held-to-maturity securities in its balance sheet? (Points : 1)
3. Large, highly rated firms sometimes sell commercial paper: (Points : 1)
4. Which of the following increases the investment account under the equity method of accounting? (Points : 1)
5. When the equity method of accounting for investments is used by the investor, the investment account is increased when: (Points : 1)
6. Which of the following is a contingency that would most likely require accrual? (Points : 1)
7. When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes: (Points : 1)
8. Other things being equal, most managers would prefer to report liabilities as noncurrent rather than current. The logic behind this preference is that the long-term classification permits the company to report: (Points : 1)
9. The key accounting considerations relating to accounts payable are: (Points : 1)
10. The investment category for which the investor's "positive intent and ability to hold" is important is: (Points : 1)
Click here for the solution: 1. A contingent loss should be reported in a footnote to the financial statements rather than being accrued if: (Points : 1)
1. A contingent loss should be reported in a footnote to the financial statements rather than being accrued if: (Points : 1)
2. Which of the following investment securities held by Zoogle Inc. may be classified as held-to-maturity securities in its balance sheet? (Points : 1)
3. Large, highly rated firms sometimes sell commercial paper: (Points : 1)
4. Which of the following increases the investment account under the equity method of accounting? (Points : 1)
5. When the equity method of accounting for investments is used by the investor, the investment account is increased when: (Points : 1)
6. Which of the following is a contingency that would most likely require accrual? (Points : 1)
7. When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes: (Points : 1)
8. Other things being equal, most managers would prefer to report liabilities as noncurrent rather than current. The logic behind this preference is that the long-term classification permits the company to report: (Points : 1)
9. The key accounting considerations relating to accounts payable are: (Points : 1)
10. The investment category for which the investor's "positive intent and ability to hold" is important is: (Points : 1)
Click here for the solution: 1. A contingent loss should be reported in a footnote to the financial statements rather than being accrued if: (Points : 1)
Wednesday, November 25, 2015
On May 1, 2010, Kirmer Corp. purchased $450,000 of 12% bonds, interest payable on January 1 and July 1, for $422,800 plus accrued interest
On May 1, 2010, Kirmer Corp. purchased $450,000 of 12% bonds, interest payable on January 1 and July 1, for $422,800 plus accrued interest. The bonds mature on January 1, 2016. Amortization is recorded when interest is received by the straight-line method (by months and rounded to the nearest dollar). (Assume bonds are available for sale.)
Instructions
(a) Prepare the entry for May 1, 2010.
(b) The bonds are sold on August 1, 2011 for $425,000 plus accrued interest. Prepare all entries required to properly record the sale.
Click here for the solution: On May 1, 2010, Kirmer Corp. purchased $450,000 of 12% bonds, interest payable on January 1 and July 1, for $422,800 plus accrued interest
Instructions
(a) Prepare the entry for May 1, 2010.
(b) The bonds are sold on August 1, 2011 for $425,000 plus accrued interest. Prepare all entries required to properly record the sale.
Click here for the solution: On May 1, 2010, Kirmer Corp. purchased $450,000 of 12% bonds, interest payable on January 1 and July 1, for $422,800 plus accrued interest
Thursday, September 24, 2015
Mildred Corp. owes D. Taylor Corp. a 10-year, 10% note in the amount of $110,000 plus $11,000 of accrued interest
P14-15 (Debtor/Creditor Entries for Continuation of Troubled Debt with
New Effective Interest) Mildred Corp. owes D. Taylor Corp. a 10-year,
10% note in the amount of $110,000 plus $11,000 of accrued interest. The
note is due today, December 31, 2007. Because Mildred Corp. is in
financial trouble, D. Taylor Corp. agrees to forgive the accrued
interest, $10,000 of the principal, and to extend the maturity date to
December 31, 2010. Interest at 10% of revised principal will continue to
be due on 12/31 each year.
Assume the following present value factors for 3 periods.
21/4% 23/8% 21/2% 25/8% 23/4% 3%
Single sum .93543 .93201 .92859 .92521 .92184 .91514
Ordinary annuity of 1 2.86989 2.86295 2.85602 2.84913 2.84226 2.82861
Instructions
(a) Compute the new effective interest rate for Mildred Corp. following restructure. (Hint: Find the interest rate that establishes approximately $121,000 as the present value of the total future cash flows.)
(b) Prepare a schedule of debt reduction and interest expense for the years 2007 through 2010.
(c) Compute the gain or loss for D. Taylor Corp. and prepare a schedule of receivable reduction and interest revenue for the years 2007 through 2010.
(d) Prepare all the necessary journal entries on the books of Mildred Corp. for the years 2007, 2008, and 2009.
(e) Prepare all the necessary journal entries on the books of D. Taylor Corp. for the years 2007, 2008, and 2009.
Click here for the solution: Mildred Corp. owes D. Taylor Corp. a 10-year, 10% note in the amount of $110,000 plus $11,000 of accrued interest
Assume the following present value factors for 3 periods.
21/4% 23/8% 21/2% 25/8% 23/4% 3%
Single sum .93543 .93201 .92859 .92521 .92184 .91514
Ordinary annuity of 1 2.86989 2.86295 2.85602 2.84913 2.84226 2.82861
Instructions
(a) Compute the new effective interest rate for Mildred Corp. following restructure. (Hint: Find the interest rate that establishes approximately $121,000 as the present value of the total future cash flows.)
(b) Prepare a schedule of debt reduction and interest expense for the years 2007 through 2010.
(c) Compute the gain or loss for D. Taylor Corp. and prepare a schedule of receivable reduction and interest revenue for the years 2007 through 2010.
(d) Prepare all the necessary journal entries on the books of Mildred Corp. for the years 2007, 2008, and 2009.
(e) Prepare all the necessary journal entries on the books of D. Taylor Corp. for the years 2007, 2008, and 2009.
Click here for the solution: Mildred Corp. owes D. Taylor Corp. a 10-year, 10% note in the amount of $110,000 plus $11,000 of accrued interest
Monday, August 31, 2015
Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts
Problem 9-30 Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts. Design a substantive audit procedure that provides reasonable assurance of detecting each misstatement.
1. A bonus earned by the president of the company has not been recorded.
2. Several accounts payable to vendors that the company has never purchased from before are omitted from the accounts payable listing.
3. When client employees counted the physical inventory, they included a number of items that were consigned to, but do not belong to, the company.
4. There is no disclosure in the financial statements that a large accounts payable is due to a related party.
5. Accrued payroll is understated.
6. One-third of the inventory of diamond jewelry is actually cubic zircona or white sapphires.
7. The client paid the same vendor invoice twice, although it is still shown as an account payable.
8. Client personnel informed the auditors that underground petroleum tanks contained an inventory of high-octane gasoline when they actually contained water.
9. The client failed to record warranty expenses incurred after year-end applicable to sales made before year-end.
10. Inventory in one corner of the warehouse is overlooked and not counted during the client’s physical inventory count.
Click here for the solution: Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts
1. A bonus earned by the president of the company has not been recorded.
2. Several accounts payable to vendors that the company has never purchased from before are omitted from the accounts payable listing.
3. When client employees counted the physical inventory, they included a number of items that were consigned to, but do not belong to, the company.
4. There is no disclosure in the financial statements that a large accounts payable is due to a related party.
5. Accrued payroll is understated.
6. One-third of the inventory of diamond jewelry is actually cubic zircona or white sapphires.
7. The client paid the same vendor invoice twice, although it is still shown as an account payable.
8. Client personnel informed the auditors that underground petroleum tanks contained an inventory of high-octane gasoline when they actually contained water.
9. The client failed to record warranty expenses incurred after year-end applicable to sales made before year-end.
10. Inventory in one corner of the warehouse is overlooked and not counted during the client’s physical inventory count.
Click here for the solution: Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts
Tuesday, August 18, 2015
On March 31, 2007, Hanson Corporation sold $5,000,000 of its 8%, 10-year bonds for $4,807,500 including accrued interest
On March 31, 2007, Hanson Corporation sold $5,000,000 of its 8%, 10-year bonds for $4,807,500 including accrued interest. The bonds were dated January 1, 2007. Interest is paid semiannually on January 1 and July 1. On April 1, 2011, Hanson purchased 1/2 of the bonds on the open market at 99 plus accrued interest and canceled them. Hanson uses the straight-line method for amortization of bond premiums and discounts.
(a) What was the amount of the gain or loss on retirement of the bonds?
(b) Prepare the journal entry needed at April 1, 2011 to record retirement of the bonds. Assume that interest and premium or discount amortization have been recorded through January 1, 2011. Record interest and amortization on only the bonds retired.
(c) Prepare the journal entry needed at July 1, 2011 to record interest and premium or discount amortization.
Click here for the solution: On March 31, 2007, Hanson Corporation sold $5,000,000 of its 8%, 10-year bonds for $4,807,500 including accrued interest
(a) What was the amount of the gain or loss on retirement of the bonds?
(b) Prepare the journal entry needed at April 1, 2011 to record retirement of the bonds. Assume that interest and premium or discount amortization have been recorded through January 1, 2011. Record interest and amortization on only the bonds retired.
(c) Prepare the journal entry needed at July 1, 2011 to record interest and premium or discount amortization.
Click here for the solution: On March 31, 2007, Hanson Corporation sold $5,000,000 of its 8%, 10-year bonds for $4,807,500 including accrued interest
Subscribe to:
Posts (Atom)