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E7.10.
(continued)
a.
Dr. Warranty Expense ...................................................................... 20,700
Cr. Estimated Warranty Liability .............................................. 20,700
E7.11.
a.
Keg deposits are a current liability on the balance sheet because they are amounts that are
likely to be paid within a year.
b.
Balance Sheet Income Statement .
Assets = Liabilities + Stockholders’ Equity Net income = Revenues - Expenses
E7.11.
(continued)
d.
The cost of kegs purchased would be capitalized in a noncurrent asset account, and then be
depreciated over the kegs' estimated useful life. The net book value of kegs removed from
service or lost (as in part c) would be removed from the asset and recorded as an expense
E7.12.
a.
Balance Sheet Income Statement .
Assets = Liabilities + Stockholders’ Equity Net income = Revenues - Expenses
Cash Unearned Ticket
E7.13.
a.
The market interest rate is lower than the stated interest rate, so the bonds will sell for
more than their face amount. The lower the discount rate (i.e., market interest rate), the
b.
Balance Sheet Income Statement .
Assets = Liabilities + Stockholders’ Equity Net income = Revenues - Expenses
Cash Bonds Payable
+2,060,000 +2,000,000
Premium on
c.
| | |
4/1/16 6 months 9/30/16
Bonds issued. End of fiscal year.
Accrued interest payable ($2,000,000 * 7% * 6/12) ...................................... $70,000
Premium amortization ($60,000 / 20 years * 6/12) ...............………............ (1,500)
E7.14.
a.
The market interest rate is higher than the stated interest rate, so the bonds will sell for
b.
Balance Sheet Income Statement .
Assets = Liabilities + Stockholders’ Equity Net income = Revenues - Expenses
Cash Bonds Payable
+24,880,000 +25,000,000
Discount on
c.
Accrued interest payable ($25,000,000 * 6% * 4/12) .................................... $500,000
Discount amortization ($120,000 / 10 years * 4/12)..............………............ 4,000
Interest expense for 4 months ........................……….................................... $504,000
Balance Sheet Income Statement .
Assets = Liabilities + Stockholders’ Equity Net income = Revenues - Expenses
Effect of interest accrual on financial statements:
Discount on Interest
E7.15.
The semiannual interest on the bonds = 10% stated rate * $30,000 face amount
* 6/12 = $1,500
E7.16.
The annual interest on the bonds = 10% stated rate * $90,000 face amount = $9,000
The remaining term of the bonds is 15 years.
E7.17.
a.
Annual interest payment = $85 million * 5% = $4,250,000
b.
The bonds were issued at a premium because market interest rates were less than the stated
E7.18.
a.
Annual interest payment = $310 million * 8.5% = $26,350,000
E7.19.
The amount of deferred income taxes has risen steadily because the excess of accelerated
E7.20.
E7.21.
Transaction/ Current Current Long-Term Net
Adjustment Assets Liabilities Debt Income
a. +465 -465
b. +340 -340
E7.21.
(continued)
Journal entries:
a.
Dr. Wages Expense .............................................................. 465
Cr. Wages Payable ....................................................... 465
E7.22.
Transaction/ Current Current Long-Term Net
Adjustment Assets Liabilities Debt Income
a. -2,650 -2,650
E7.22.
(continued)
Journal entries:
a.
Dr. Wages Payable ...............................................................……… 2,650
Cr. Cash.........................................................................……… 2,650
E7.23.
Transaction/ Current Noncurrent Current Noncurrent Stockholders' Net
Adjustment Assets Assets Liabilities Liabilities Equity Income
-300
-128 Liability
-128
e. Cash Notes Payable
-1,350
f. Current Serial Bonds
Maturities Payable
of Long-term -70,000
E7.23.
(continued)
c.
Dr. Land ........................................................................................... 9,000
Cr. Cash.................................................................................... 9,000
E7.24.
Transaction/ Current Noncurrent Current Noncurrent Stockholders' Net
Adjustment Assets Assets Liabilities Liabilities Equity Income
a. Truck Capital Lease
+130,000 Liability
+130,000
b. Wages Wages
Payable Expense
+10,200 -14,400
