WEEK 2 EXERCISES ASSIGNMENT
Exercise
15-1
During its first year of
operations, Collin Raye Corporation had the following transactions pertaining
to its common stock.
Jan. 10 Issued 80,000 shares
for cash at $6 per share.
Mar. 1 Issued 5,000 shares
to attorneys in payment of a bill for $35,000 for services rendered in
helping the company to incorporate.
July 1 Issued 30,000 shares
for cash at $8 per share.
Sept. 1 Issued 60,000 shares
for cash at $10 per share.
(a) Prepare the journal entries
for these transactions, assuming that the common stock has a par value of
$5 per share.
(b) Prepare the journal entries
for these transactions, assuming that the common stock is no-par with a stated
value of $3 per share.
(Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter
0 for the amounts.)
Date Account Titles and
Explanation Debit Credit
(a) Jan. 10
Mar. 1
July 1
Sept. 1
(b) Jan. 10
Mar. 1
July 1
Sept. 1
Exercise
15-6
Lindsey Hunter Corporation is
authorized to issue 50,000 shares of $5 par value common stock.
During 2014, Lindsey Hunter took
part in the following selected transactions.
1. Issued 5,000 shares
of stock at $45 per share, less costs related to the issuance of the stock
totaling $7,000.
2. Issued 1,000 shares
of stock for land appraised at $50,000. The stock was actively traded on a
national stock exchange at approximately $46 per share on the date of
issuance.
3. Purchased 500 shares
of treasury stock at $43 per share. The treasury shares purchased were
issued in 2010 at $40 per share.
(a) Prepare the journal entry to
record item 1.
(b) Prepare the journal entry to
record item 2.
(c) Prepare the journal entry to
record item 3 using the cost method.
(Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter
0 for the amounts.)
No. Account Titles and
Explanation Debit Credit
(a)
(b)
(c)
Exercise
15-14
The stockholders’ equity accounts
of G.K. Chesterton Company have the following balances on December 31, 2014.
Common stock, $10
par, 300,000 shares issued and outstanding $3,000,000
Paid-in capital in excess of
par—common stock 1,200,000
Retained earnings 5,600,000
Shares of G.K. Chesterton Company
stock are currently selling on the Midwest Stock Exchange at $37.
Prepare the appropriate journal entries for each of the following cases.
(Credit account titles are automatically indented when amount is entered. Do
not indent manually. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts.)
(a) A stock dividend of 5%
is (1) declared and (2) issued.
(b) A stock dividend of 100% is
(1) declared and (2) issued.
(c) A 2-for-1 stock split is
(1) declared and (2) issued.
No. Account Titles and
Explanation Debit Credit
(a) (1)
(a) (2)
(b) (1)
(b) (2)
(c) (1)
(c) (2)
Exercise
15-18
Anne Cleves Company reported the
following amounts in the stockholders’ equity section of its December 31, 2013,
balance sheet.
Preferred stock, 10%,
$100 par (10,000 shares authorized, 2,000 shares issued) $200,000
Common stock, $5 par
(100,000 shares authorized, 20,000 shares issued) 100,000
Additional paid-in capital 125,000
Retained earnings 450,000
Total $875,000
During 2014, Cleves took part in
the following transactions concerning stockholders’ equity.
1. Paid the annual 2013
$10 per share dividend on preferred stock and a $2 per share dividend
on common stock. These dividends had been declared on December 31, 2013.
2.
Purchased 1,700 shares of its own outstanding common stock for
$40 per share. Cleves uses the cost method.
3.
Reissued 700 treasury shares for land valued at $30,000.
4. Issued 500 shares of
preferred stock at $105 per share.
5. Declared a 10% stock
dividend on the outstanding common stock when the stock is selling for
$45 per share.
6. Issued the stock dividend.
7. Declared the annual 2014
$10 per share dividend on preferred stock and the $2 per share
dividend on common stock. These dividends are payable in 2015.
(a) Prepare journal entries to
record the transactions described above. (Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter
0 for the amounts.)
No. Account Titles and
Explanation Debit Credit
(b) Prepare the December 31, 2014,
stockholders’ equity section. Assume 2014 net income was $330,000. (Enter
account name only .Do not provide any descriptive information.)
Exercise
16-2
Aubrey Inc. issued
$4,000,000 of 10%, 10-year convertible bonds on June 1, 2014,
at 98 plus accrued interest. The bonds were dated April 1, 2014, with
interest payable April 1 and October 1. Bond discount is amortized semiannually
on a straight-line basis.
On April 1, 2015, $1,500,000 of these bonds were converted
into 30,000 shares of $20 par value common stock. Accrued
interest was paid in cash at the time of conversion.
(a) Prepare the entry to record
the interest expense at October 1, 2014. Assume that accrued interest payable
was credited when the bonds were issued.
(b) Prepare the entry to record
the conversion on April 1, 2015. (Book value method is used.) Assume that the
entry to record amortization of the bond discount and interest payment has been
made.
(Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter
0 for the amounts. Round answers to 0 decimal places, e.g. $3,500.)
No. Account Titles and
Explanation Debit Credit
Exercise
16-7
Illiad Inc. has decided to raise
additional capital by issuing $170,000 face value of bonds with a coupon
rate of 10%. In discussions with investment bankers, it was determined
that to help the sale of the bonds, detachable stock warrants should be issued
at the rate of one warrant for each $100 bond sold. The value of the bonds
without the warrants is considered to be $136,000, and the value of the
warrants in the market is $24,000. The bonds sold in the market at issuance for
$152,000.
(a) What entry should be made at the time of the issuance of the bonds and
warrants? (Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select "No
Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit Credit
(b) Prepare the entry if the
warrants were nondetachable. (Credit account titles are automatically indented
when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
Exercise
17-2
On January 1, 2013, Dagwood
Company purchased at par 12% bonds having a maturity value of $300,000. They
are dated January 1, 2013, and mature January 1, 2018, with interest receivable
December 31 of each year. The bonds are classified in the held-to-maturity
category.
(a) Prepare the journal entry at
the date of the bond purchase.
(b) Prepare the journal entry to
record the interest received for 2013.
(c) Prepare the journal entry to
record the interest received for 2014.
(Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter
0 for the amounts.)
No. Date Account Titles and Explanation Debit Credit
(a) Jan. 1, 2013
(b) Dec. 31, 2013
(c) Dec. 31, 2014
Exercise
17-4
On January 1, 2013, Hi and Lois
Company purchased 12% bonds, having a maturity value of $300,000, for
$322,744.44. The bonds provide the bondholders with a 10.00% yield. They
are dated January 1, 2013, and mature January 1, 2018, with interest receivable
December 31 of each year. Hi and Lois Company uses the effective-interest
method to allocate unamortized discount or premium. The bonds are classified as
available-for-sale category. The fair value of the bonds at December 31 of each
year-end is as follows.
2013 $320,500 2016 $310,000
2014 $309,000 2017
$300,000
2015 $308,000
(a) Prepare the journal entry at
the date of the bond purchase.
(b) Prepare the journal entries
to record the interest received and recognition of fair value for 2013.
(c) Prepare the journal entry to
record the recognition of fair value for 2014.
(Round answers to 2 decimal
places, e.g. 2,525.25. Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
No. Date Account Titles and
Explanation Debit Credit
(a) Jan. 1, 2013
(b) Dec. 31, 2013
Dec. 31, 2013
(c) Dec. 31, 2014
Exercise
17-7
On December 21, 2013, Bucky Katt
Company provided you with the following information regarding its trading
securities.
December 31, 2013
Investments (Trading) Cost Fair Value Unrealized
Gain (Loss)
Clemson Corp. stock $20,000 $19,000 $(1,000)
Colorado Co. stock 10,000 9,000 (1,000)
Buffaloes Co. stock 20,000 20,600 600
Total of portfolio $50,000 $48,600 (1,400)
Previous fair value adjustment
balance 0
Fair value adjustment—Cr. $(1,400)
During 2014, Colorado Company
stock was sold for $9,400. The fair value of the stock on December 31, 2014,
was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500.
(a) Prepare the adjusting journal
entry needed on December 31, 2013.
(b) Prepare the journal entry to
record the sale of the Colorado Company stock during 2014.
(c) Prepare the adjusting journal
entry needed on December 31, 2014.
(Credit
account titles are automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts.)
Exercise
17-13
Parent Co. invested
$1,000,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays
out 40% of net income in dividends each year.
Use the information in the following T-account for the investment in Sub to
answer the following questions.
Investment in Sub Co.
1,000,000
110,000
44,000
(a) How much was Parent Co.’s
share of Sub Co.’s net income for the year?
Net income $
(b) How much was Parent Co.’s
share of Sub Co.’s dividends for the year?
Dividends $
(c) What was Sub Co.’s total net
income for the year?
Total net income $
(d) What was Sub Co.’s total
dividends for the year?
Total Dividends $
Exercise
17-16
Jaycie Phelps Inc. acquired 20%
of the outstanding common stock of Theresa Kulikowski Inc. on December 31,
2013. The purchase price was $1,200,000 for 50,000 shares.
Kulikowski Inc. declared and paid an $0.85 per share cash dividend on June
30 and on December 31, 2014. Kulikowski reported net income of $730,000 for
2014. The fair value of Kulikowski’s stock was $27 per share at December
31, 2014.
(a) Prepare the journal entries
for Jaycie Phelps Inc. for 2013 and 2014, assuming that Phelps cannot exercise
significant influence over Kulikowski. The securities should be classified as available-for-sale.
(Credit account titles are automatically indented when amount is entered. Do
not indent manually. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts.)
Date Account Titles and Explanation Debit Credit
Dec. 31, 2013
June 30, 2014
Dec. 31, 2014
(b) Prepare the journal entries
for Jaycie Phelps Inc. for 2013 and 2014, assuming that Phelps can exercise
significant influence over Kulikowski. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for
the amounts.)
Date Account Titles and
Explanation Debit Credit
Dec. 31, 2013
June 30, 2014
Dec. 31, 2014
(c) At what amount is the
investment in securities reported on the balance sheet under each of these
methods at December 31, 2014? What is the total net income reported in 2014
under each of these methods?
Fair Value Method Equity Method
Investment amount
Dividend revenue
Investment income (income
statement)
TUTORIAL PREVIEW
|
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
(a)
|
Jan. 10
|
Cash (80,000 X $6)
|
480,000
|
|
|
|
|
Common Stock (80,000 X $5)
|
|
400,000
|
|
|
|
Paid-in Capital in Excess of
Par— Common Stock
|
|
80,000
|
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