1) Pachelor Corporation owns 70% of the outstanding stock of Stabb Company. On
January 1, 2010, Stabb issued $1,000,000 in 7% bonds that matured on January 1,
2015 . At the time of issuance, the bonds were sold at a discount of $125,000. At
January 2, 2012, Pachelor purchased the bonds for $1,400,000, and constructively
retired the debt. Interest is paid annually on January 1 . Straight-line amortization is
used by both companies.
Required:
1>Calculate the gain or loss that the consolidated entity incurred to retire the debt.
2>Prepare eliminating/adjusting entries for the consolidating work papers for the year
ended December 31, 2012 .
2) Xavier, Young, and Zane operate a partnership with a complex profit and loss sharing
agreement. The average capital balance for each partner on December 31, 2011 is
$300,000 for Xavier, $250,000 for Young, and $325,000 for Zane. An 8% interest
allocation is provided to each partner based on the average capital balance on December
31, 2011 . Xavier and Young receive salary allocations of $10,000 and $15,000,
respectively. If partnership net income is above $25,000, after the salary allocations are
considered (but before the interest allocations are considered), Zane will receive a
bonus of 10% of the original amount of net income. All residual income is allocated in
the ratios of 2:3:5 to Xavier, Young, and Zane, respectively.
Required:
1>Prepare a schedule to allocate income to the partners assuming that partnership net
income for 2011 is $250,000.
2>Prepare a journal entry to distribute the partnership’s income to the partners (assume
that an Income Summary account is used by the partnership).
3) Sabu is a 65%-owned subsidiary of Peerless. On January 1, 2010, Sabu issued
$1,000,000 of $1,000 face amount 8% bonds at $980 per bond. The bonds have interest
payments on December 31 of each year and mature on January 1, 2015 . On January 1,
2011, Peerless purchased all 1,000 bonds on the open market for $1,010 per bond.
Straight-line amortization is used by both companies.
Required: With respect to the bonds, use General Journal format to:
1>.Record the journal entries on Sabu’s books made from 2010 to 2015 .
2>Record the journal entries on Peerless’ books made from 2010 to 2015 .
3>Record the elimination entries for the consolidation working papers for 2010 through
2015 .
4) The unadjusted trial balance for the general fund of the City of Nineva at June 30,
2011 is as follows:
Debits
Accounts receivable$40,000
Cash75,000
Due from agency fund25,000
Encumbrances60,000
Estimated revenues975,000
Expenditures750,000
Taxes receivable250,000
Credits
Allowance for doubtful accounts5,000
Allowance for uncollectible taxes50,000
Appropriations785,000
Due to trust fund40,000
Fund balance-unassigned30,000
Reserve for encumbrances60,000
Revenues990,000
Taxes received in advance15,000
Vouchers payable200,000
Supplies on hand at June 30, 2011 totaled $8,000. The $60,000 encumbrance relates to
equipment ordered but not received by fiscal year-end.
Required:
Prepare a balance sheet for the general fund of the City of Nineva at June 30, 2011 .
5) For each of the following events or transactions, identify the fund or funds that will
be affected.
1>A city government provides electricity services to residents for a fee.
2>A printing shop was established to handle the printing needs of a county government.
3>A philanthropist donates $1 million for zoo maintenance, only earnings can be used.
4>A city government collects sales taxes on behalf of the state and for some of its
counties and municipalities.
5>Interest is paid on a state government’s general obligation bonds.
6) A private, not-for-profit university received donations of $800,000 in 2011 that were
restricted to capital improvements of the football stadium. The university spent
$670,000 on capital improvements for the stadium in 2011 and recorded depreciation of
$130,000.
In 2011, an alumnus contributed a $1,500,000 endowment for football scholarships with
all endowment income restricted for that purpose. Endowment income totaled $75,000
for the year and scholarship awards were $68,000.
Required:
Prepare the appropriate journal entries for the university for these transactions.