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1) Sergei Company issued $400,000 of bonds on January 1, 2014 .
Instructions
Prepare the journal entry to record the redemption of the bonds at maturity, assuming
the bonds were issued at 100 .
Prepare the journal entry to record the redemption of the bonds before maturity at 97 .
Assume the balance in Premium on Bonds Payable is $4,000.
Prepare the journal entry to record the conversion of the bonds into 15,000 shares of
$10 par value common stock. Assume the bonds were issued at par.
2) Identify whether the following items would be reported on the income statement (IS)
or balance sheet (BS).
1>Cash
2>Service Revenue
3>Notes Payable
4>Interest Expense
5>Accounts Receivable
3) Maria Queen was reviewing her business activities at the end of the year (2014) and
decided to prepare an Owner's Equity Statement. At the beginning of the year her assets
were $500,000 and her liabilities were $210,000. At the end of the year the assets had
grown to $750,000 but liabilities had also increased to $360,000. The net income for the
year was $220,000. Maria had withdrawn $120,000 during the year for her personal
use.
Prepare an owner's equity statement in good form.
4) Aeroplane Insurance Agency prepares monthly financial statements. Presented below
is an income statement for the month of June that is correct on the basis of information
considered.
AEROPLANE INSURANCE AGENCY
Income Statement
For the Month Ended June 30
Revenues
Sales revenue$35,000
Expenses
Salaries and wages expense$6,000
Rent expense4,200
Depreciation expense 2,800
Advertising expense 800
Total expenses 13,800
Net income$21,200
Additional Data: When the income statement was prepared, the company accountant
neglected to take into consideration the following information:
1>A utility bill for $2,500 was received on the last day of the month for electric and gas
service for the month of June.
2>A company insurance salesman sold a life insurance policy to a client for a premium
of $25,000. The agency billed the client for the policy and is entitled to a commission of
20%.
3>Supplies on hand at the beginning of the month were $3,000. The agency purchased
additional supplies during the month for $4,000 in cash and $2,200 of supplies were on
hand at June 30 .
4>The agency purchased a new car at the beginning of the month for $22,000 cash. The
car will depreciate $5,400 per year.
5>Salaries owed to employees at the end of the month total $6,100. The salaries will be
paid on July 5 .
Instructions
Prepare a correct income statement.
5) The cost of paving, fencing, and lighting a new company parking lot is charged to a
______________ account.
