Acc291 Principles of Accounting: Weeks 1 to 5 Assignments
Important Reminder: Please take the time to review and compare the questions listed below BEFORE buying the tutorial. Acc291 Financial Accounting (Weeks 1 to 5 Assignment) Week 1 Assignment E9-2 Trudy Company incurred the following costs. 1. Sales tax on factory machinery purchased $5,000 2. Painting of and lettering on truck immediately upon purchase 700 3. Installation and testing of factory machinery 2,000 4. Real estate broker’s commission on land purchased 3,500 5. Insurance premium paid for first year’s insurance on new truck 880 6. Cost of landscaping on property purchased 7,200 7. Cost of paving parking lot for new building constructed 17,900 8. Cost of clearing, draining, and filling land 13,300 9. Architect’s fees on self-constructed building 10,000 Indicate to which account Trudy would debit each of the costs. ACC 291 Week 2 Assignment E9‑1 The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011. 1. Paid $5,000 of accrued taxes at time plant site was acquired. 2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit. 3. Paid $850 sales taxes on new delivery truck. 4. Paid $17,500 for parking lots and driveways on new plant site. 5. Paid $250 to have company name and advertising slogan painted on new delivery truck. 6. Paid $8,000 for installation of new factory machinery. 7. Paid $900 for one-year accident insurance policy on new delivery truck. 8. Paid $75 motor vehicle license fee on the new truck. Instructions (a) Explain the application of the cost principle in determining the acquisition cost of plant assets. (b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited. E9-7 Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011. The truck has an expected salvage value of 2,000 and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2011 and 12,000 in 2012. Instructions a) Compute depreciation expense for 2010 and 2011 using (1) the straight line method (2) the units of activity method and (3) the double declining balance method. b) Assume that Brainiac uses the straight line method (1) prepare the journal entry to record 2010 depreciation. (2) Show how the truck would be reported in the December 31, 2010 balance sheet. E9-12 The following are selected 2011 transactions of Franco Corporation Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years. Instructions Prepare necessary adjusting entries at December 31 to record amortization required by the events above. P9-7B The intangible assets section of Time Company at December 31, 2011, is presented below Patent ($100,000 cost less $10,000 amortization) 90,000 Copyright ($60,000 cost less $24,000 amortization) 36,000 Total 126,000 The patent was acquired in January 2011 and has a useful life of 10 years. The copyright was acquired in January 2008 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2012. Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by another company. Jan.–June Developed a new product, incurring $230,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life. Sept. 1 Paid $125,000 to an Xgames star to appear in commercials advertising the company’s products. The commercials will air in September and October Oct. 1 Acquired a copyright for $200,000. The copyright has a useful life of 50 years. Instructions (a) Prepare journal entries to record the transactions above. (b) Prepare journal entries to record the 2012 amortization expense for intangible assets. (c) Prepare the intangible assets section of the balance sheet at December 31, 2012. (d) Prepare the note to the financials on Time’s intangibles as of December 31, 2012. ACC 291 Week 3 Assignment E10-6 According to the accountant of Ulner Inc., its payroll taxes for the week were as follows: $198.40 for FICA taxes, $19.84 for federal unemployment taxes, and $133.92 for state unemployment taxes. Instructions Journalize the entry to record the accrual of the payroll taxes. E10-8 Jim Thome has prepared the following list of statements about bonds. 1. Bonds are a form of interest bearing notes payable. 2. When seeking long term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected. 3. When seeking long term financing, an advantage of issuing common stock over issuing bonds is that tax savings result. 4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds. 5. Secured bonds are also known as debenture bonds. 6. Bonds that mature in installments are called term bonds. 7. A conversion feature may be added to bonds to make them more attractive to bond buyers. 8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate. 9. Bond prices are usually quoted as a percentage of the face value of the bond. 10. The present value of a bond is the value at which it should sell in the marketplace. Instructions Identify each statement above as true or false. If false, indicate how to correct the statement. E10-18 Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for $562,613. This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize bond premium or discount. Instructions Prepare the journal entries to record the following. (Round to the nearest dollar.) a) The issuance of the bonds. b) The payment of interest and the discount amortization on July 1, 2011, assuming that interest was not accrued on June 30. c) The accrual of interest and the discount amortization on December 31, 2011. P10-3A On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2011, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31. Instructions a) Prepare the journal entry to record the issuance of the bonds b) Prepare the adjusting entry to record the accrual of interest on December 31, 2011 c) Show the balance sheet presentation on December 31, 2011. d) Prepare the journal entry to record payment of interest of May 1, 2012, assuming no accrual of interest from January 1, 2012 to May 1, 2012. e) Prepare the journal entry to record payment of interest on November 1, 2012 f) Assume that on November 1, 2012, Newby calls the bonds at 102. record the redemption of the bonds. P10-6A On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-year bonds at $2,271,813.This price resulted in an effective-interest rate of 8% on the bonds. Atwater uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1. Instructions (Round all computations to the nearest dollar.) (a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011. (b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bond issue. (c) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2011. (d) Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2012, assuming no accrual of interest on June 30. (e) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2012. ACC 291 Week 4 Assignment E11-15 On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000. Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share. Instructions Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and book value per share. Use the following column headings: E12-1 Max Weinberg is studying for an accounting test and has developed the following questions about investments. 1. What are three reasons why companies purchase investments in debt or stock securities? 2. Why would a corporation have excess cash that it does not need for operations? 3. What is the typical investment when investing cash for short periods of time? 4. What are the typical investments when investing cash to generate earnings? 5. Why would a company invest in securities that provide no current cash flows? 6. What is the typical stock investment when investing cash for strategic reasons? Instructions Provide answers for Max. E12-2 Foren Corporation had the following transactions pertaining to debt investments. Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of $900. Interest is payable semiannually on July 1 and January 1. July 1 Received semiannual interest on Choate Co. bonds. July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees. Instructions (a) Journalize the transactions. (b) Prepare the adjusting entry for the accrual of interest at December 31. P11-6A Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%, noncumulative preferred stock and 2,000,000 shares of no-par common stock. The corporation assigned a $5 stated value to the common stock. At December 31, 2011, the ledger contained the following balances pertaining to stockholders’ equity. Preferred Stock $ 240,000 Paid-in Capital in Excess of Par Value—Preferred 56,000 Common Stock 2,000,000 Paid-in Capital in Excess of Stated Value—Common 5,700,000 Treasury Stock—Common (1,000 shares) 22,000 Paid-in Capital from Treasury Stock 3,000 Retained Earnings 560,000 The preferred stock was issued for land having a fair market value of $296,000.All common stock issued was for cash. In November, 1,500 shares of common stock were purchased for the treasury at a per share cost of $22. In December, 500 shares of treasury stock were sold for $28 per share. No dividends were declared in 2011. Instructions (a) Prepare the journal entries for the: (1) Issuance of preferred stock for land. (2) Issuance of common stock for cash. (3) Purchase of common treasury stock for cash. (4) Sale of treasury stock for cash. (b) Prepare the stockholders’ equity section at December 31, 2011 ACC 291 Week 5 Assignment E13-8 Here are comparative balance sheets for Taguchi Company. TAGUCHI COMPANY Comparative Balance Sheets December 31 Assets 2011 2010 Cash 73,000 22,000 Accounts Receivable 85,000 76,000 Inventories 170,000 189,000 Land 75,000 100,000 Equipment 260,000 200,000 Accumulated Depreciation (66,000) (32,000) Total $597,000 $555,000 Liabilities and stockholders' equity Accounts Payable 39,000 47,000 Bonds Payable 150,000 200,000 Common stock ($1 par) 216,000 174,000 Retained earnings 192,000 134,000 Total $597,000 $555,000 Additional information: 1. Net income for 2011 was $103,000. 2. Cash dividends of $45,000 were declared and paid. 3. Bonds payable amounting to $50,000 were redeemed for cash $50,000. 4. Common stock was issued for $42,000 cash. 5. No equipment was sold during 2011, but land was sold at cost. Instructions Prepare a statement of cash flows for 2011 using the indirect method. E14-3 The comparative condensed balance sheets of Conard Corporation are presented below. CONARD CORPORATION Comparative Condensed Balance Sheets December 31, 2011 2012 2011 Assets Current assets 74,000 80,000 Property, plant, and equipment (net) 99,000 90,000 Intangibles 27,000 40,000 Total Assets $200,000 $210,000 Liabilities and stockholders’ equity Current liabilities 42,000 48,000 Long term liabilities 143,000 150,000 Stockholders’ equity 15,000 12,000 Total liabilities and stockholders’ equity $200,000 $210,000 Instructions 1. Prepare a horizontal analysis of the balance sheet data for Conard Corporation using 2011 as a base. 2. Prepare a vertical analysis of the balance sheet data for Conard Corporation in columnar form for 2012.
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