Acc291 Principles of Accounting: Week 4 Exercises and Problems

Acc291 Principles of Accounting
Week 4 Assignment

EXERCISE 2
Eveready Company purchased 70 Ultra Company 12%, 10-year, $1,000 bonds on January 1, 2011, for $73,000.
Eveready Company also had to pay $500 of broker's fees.
The bonds pay interest semiannually on July 1 and January 1.

On January 1, 2012, after receipt of interest, Eveready Company sold 40 of the bonds for $40,100.

Instructions:
Prepare the journal entries to record the transactions described above.


EXERCISE 3
Wallace Company had the following transactions pertaining to stock investments.
Feb. 1 Purchased 800 shares of Betz common stock (2%) for $8,000 cash, plus Brokerage fees of $200.
July 1 Received cash dividends of $1 per share on Betz common stock.
Sept. 1 Sold 400 shares of Betz common stock for $4,400, less brokerage fees of $100.
Dec. 1 Received cash dividends of $1 per share on Betz common stock.

Instructions:
(a) Journalize the transactions.
(b) Explain how dividend revenue and the gain (loss) on sale should be reported in the income statement.

PROBLEM 1
Phoenix Corporation has been authorized to issue 40,000 shares of $100 par value, 8%, non-cumulative preferred stock and 1,000,000 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 220,000
Paid-in Capital in Excess of Par Value-Preferred 56,000
Common Stock 5,000,000
Paid-in Capital in Excess of Stated Value-Common 1,700,000
Treasury Stock-Common (1,000 shares) 22,000
Paid-in Capital from Treasury Stock 3,000
Retained Earnings 460,000
7,417,000

The preferred stock was issued for land having a fair market value of $276,000.
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.

Exercise 1:
Here are comparative balance sheets for Amex Enterprises.
AMEX ENTERPRISES
Comparative Balance Sheets
December 31, 2011
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 Assets 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 Liabilities & Stockholder's Equity 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.

Exercise 2:
The comparative condensed balance sheets of Boxner Corporation are presented below.
Boxner Corporation
Comparative Condensed Balance Sheets
December 31
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:
(a) Prepare a horizontal analysis of the balance sheet data for Boxner Corporation using 2011 as a base.
(b) Prepare a vertical analysis of the balance sheet data for Boxner Corporation in columnar form for 2012.
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