Resources: Ch. 10 of Financial Accounting.
Complete Exercise E10-6, E10-9, & E10-18.
Complete Problem 10-2A & 10-5A.
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.
E10-9 Northeast Airlines is considering two alternatives for the financing of a purchase of a
fleet of airplanes.These two alternatives are:
1. Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid nor
is the payment of any contemplated.)
2. Issue 10%, 10-year bonds at par for $2,700,000.
It is estimated that the company will earn $800,000 before interest and taxes as a result of this
purchase.The company has an estimated tax rate of 30% and has 90,000 shares of common stock
outstanding prior to the new financing.
Instructions
Determine the effect on net income and earnings per share for these two methods of financing
*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.
P10-2A The following are selected transactions of Winsky Company.Winsky prepares financial
statements quarterly.
Jan. 2 Purchased merchandise on account from Yokum Company, $30,000, terms 2/10, n/30.
Feb. 1 Issued a 9%, 2-month, $30,000 note to Yokum in payment of account.
Mar. 31 Accrued interest for 2 months on Yokum note.
Apr. 1 Paid face value and interest on Yokum note.
July 1 Purchased equipment from Korsak Equipment paying $11,000 in cash and signing a
10%, 3-month, $40,000 note.
Sept. 30 Accrued interest for 3 months on Korsak note.
Oct. 1 Paid face value and interest on Korsak note.
Dec. 1 Borrowed $15,000 from the Otago Bank by issuing a 3-month, 8% interest-bearing
note with a face value of $15,000.
Dec. 31 Recognized interest expense for 1 month on Otago Bank note.
Instructions
(a) Prepare journal entries for the above transactions and events.
(b) Post to the accounts Notes Payable, Interest Payable, and Interest Expense.
(c) Show the balance sheet presentation of notes and interest payable at December 31.
(d) What is total interest expense for the year?
P10-5A Fordyce Electronics issues a $400,000, 8%, 10-year mortgage note on December 31,
2010. The proceeds from the note are to be used in financing a new research laboratory. The
terms of the note provide for semiannual installment payments, exclusive of real estate taxes and
insurance, of $29,433. Payments are due June 30 and December 31.
Instructions
(a) Prepare an installment payments schedule for the first 2 years.
(b) Prepare the entries for (1) the loan and (2) the first two installment payments.
(c) Show how the total mortgage liability should be reported on the balance sheet at December
31, 2011.
No comments:
Post a Comment