Shannon Company issued $1,000,000, 8%, 10-year bonds on December 31, 2013, for
$960,000. Interest is payable annually on December 31. Shannon uses the straight-line
method to amortize bond premium or discount.
Instructions
Prepare the journal entries to record the following events.
(a)The issuance of the bonds.
(b)The payment of interest and the discount amortization on December 31, 2014.
(c)The redemption of the bonds at maturity, assuming interest for the last interest period
has been paid and recorded.
The board of directors of Yancey Company declared a cash dividend of $1.50 per share
on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on
August 15, 2014, to stockholders of record on July 31, 2014. The correct entry to be
recorded on July 15, 2014, will include a
a.debit to Dividends Payable.
b.debit to Cash Dividends.
c.credit to Cash.
d.credit to Cash Dividends.
Which of the following errors will cause a trial balance to be out of balance?
a.Posting the issuance of stock as a debit to Cash and a credit to Common stock
b.Recording the payment of prepaid rent as rent expense
c.Posting a debit amount as a credit in the ledger
d.Posting a journal entry twice
Finney Company borrowed 1,600,000 from BankTwo on January 1, 2013 in order to
expand its mining capabilities. The five-year note required annual payments of 416,698
and carried an annual interest rate of 9.5%. What is the balance in the notes payable
account at December 31, 2014?
a.1,600,000
b.1,045,458
c.1,335,302
d.1,296,000
The following totals for the month of April were taken from the payroll records of Metz
Company.
The entry to record the accrual of federal unemployment tax would include a
a.credit to Federal Unemployment Taxes Payable for $240.
b.credit to Federal Unemployment Taxes Expense for $240.
c.credit to Payroll Tax Expense for $240.
d.debit to Federal Unemployment Taxes Payable for $240.
If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its
present value is
a.$4,198.10.
b.$4,717.30.
c.$4,450.00.
d.$4,395.45.
On January 1, a machine with a useful life of five years and a residual value of $15,000
was purchased for $75,000. What is the depreciation expense for year 2 under
straight-line depreciation?
a.$15,000.
b.$45,000.
c.$12,000.
d.$36,000.
Stan’s Lumber Mill sold two pieces of equipment in 2014. The following information
pertains to the two pieces of equipment:
Instructions
(a)Compute the depreciation on each piece of equipment to the date of disposal.
(b)Prepare the journal entries in 2014 to record 2014 depreciation and the sale of each
piece of equipment.
Under U.S. GAAP
a.currency signs are generally used in the journal, ledger, trial balance, and financial
statements.
b.share Capital – Ordinary is referred to as Retained Earnings.
c.the statement of financial position is often called the statement of changes in financial
position.
d.the rules of debits and credits, and the steps in the recording process are the same as
under IFRS (International Financial Reporting Standards).
Sparks Company received proceeds of $423,000 on 10-year, 8% bonds issued on
January 1, 2013. The bonds had a face value of $400,000, pay interest annually on
December 31st, and have a call price of 102. Sparks uses the straight-line method of
amortization. What is the carrying value of the bonds on January 1, 2015?
a.$400,000
b.$418,400
c.$381,600
d.$420,700
Why are adjusting entries necessary?
a.To update amounts in retained earnings for activity that occurred during the period
b.To correct errors due to erroneous recording of journal entries
c.To update accounts due to resources used, amounts expired due to the passage of time,
or amounts that may need to be recorded
d.To remove the balances of temporary accounts so that financial statements can be
prepared
Gunselman Company purchased a machine on January 1, 2014. In addition to the
purchase price paid, the following additional costs were incurred:
(a)sales tax paid on the purchase price,
(b)transportation and insurance costs while the machinery was in transit from the seller,
(c)personnel training costs for initial operation of the machinery,
(d)installation costs necessary to secure the machinery to the building flooring,
(e)major overhaul to extend the life of the machinery,
(f)lubrication of the machinery gearing before the machinery was placed into service,
(g)lubrication of the machinery gearing after the machinery was placed into service, and
(h)annual city operating license.
Instructions
Indicate whether the items (a) through (h) are capital or revenue expenditures in the
spaces provided: C = Capital, R = Revenue.
Montz Company is considering investing in an annuity contract that will return $80,000
annually at the end of each year for 12 years. Montz has obtained the following values
related to the time value of money to help in its planning process and compounded
interest decisions.
To the closest dollar, what amount should Montz Company pay for this investment if it
earns a 9% return?
a.$994,132
b.$1,185,014
c.$1,611,258
d.$572,858
Instructions
State the missing items identified by ?.
1>Gross profit – Operating expenses = ?
2>Cost of goods sold + Gross profit = ?
3>Sales revenue – (? + ?) = Net sales
4>Income from operations + ? – ? = Net income
5>Net sales – Cost of goods sold = ?
Using the code letters below, indicate how each of the items listed would be handled in
preparing a bank reconciliation. Enter the appropriate code letter in the space to the left
of each item.
Items:
The current sections of Magic Marine Inc.’s balance sheets at December 31, 2013 and
2014, are presented here.
Magic Marine ‘s net income for 2014 was $216,000. Depreciation expense was
$34,000.
Instructions
Prepare the net cash provided by operating activities section of the company’s statement
of cash flows for the year ended December 31, 2014, using the indirect method.
Kinsler Company uses the percentage-of-receivables method for recording bad debt
expense. The Accounts Receivable balance is $200,000 and credit sales are $1,000,000.
Management estimates that 6% of accounts receivable will be uncollectible. What
adjusting entry will Kinsler Company make if the Allowance for Doubtful Accounts has
a credit balance of $2,000 before adjustment?
The stockholders’ equity section of Fleming Corporation at December 31, 2013,
included the following:
Dividends were not declared on the preferred stock in 2013 and are in arrears.
On September 15, 2014, the board of directors of Fleming Corporation declared
dividends on the preferred stock to stockholders of record on October 1, 2014, payable
on October 15, 2014.
On November 1, 2014, the board of directors declared a $1 per share dividend on the
common stock, payable November 30, 2014, to stockholders of record on November
15, 2014.
Instructions
Prepare the journal entries that should be made by Fleming Corporation on the dates
indicated below:
The adjusted trial balance of McCoy Company included the following selected accounts:
Instructions
1>Use the above information to prepare a multiple-step income statement for the year
ended December 31, 2014.
2>Calculate the profit margin and gross profit rate.
Lowe Inc.’s bank statement from Western Bank at August 31, 2014, gives the following
information.
A summary of the Cash account in the ledger for August shows the following: balance,
August 1, $21,100, receipts $81,000; disbursements $73,570; and balance, August 31,
$28,530. Analysis reveals that the only reconciling items on the July 31 bank
reconciliation were a deposit in transit for $7,000 and outstanding checks of $4,500. In
addition, you determine that there was an error involving a company check drawn in
August: A check for $400 to a creditor on account that cleared the bank in August was
journalized and posted for $40.
Instructions
Revson Corporation purchased land adjacent to its plant to improve access for trucks
making deliveries. Expenditures incurred in purchasing the land were as follows:
purchase price, $55,000; broker’s fees, $6,000; title search and other fees, $5,000;
demolition of an old building on the property, $5,700; grading, $1,200; digging
foundation for the road, $3,000; laying and paving driveway, $25,000; lighting $7,500;
signs, $1,500. List the items and amounts that should be included in the Land account.
Moon Company issued $500,000, 10%, 5-year bonds on January 1, 2014, at 106.
Interest is payable annually on January 1. Moon uses the effective-interest method of
amortization and has a calendar year end and the bonds were issued for an effective
interest rate of 8%.
Instructions
Prepare all journal entries made in 2014 related to the bond issue.
Erin Corporation purchases $500 of merchandise on credit. Using the periodic
inventory approach, Erin would record this transaction as: