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ACC291 Week3 E11-8 E11-15 E12-2 E12-13 Individual

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Complete Exercise E11-8; 11-15, E12-2 E12-10; E12-13

E11-8 As an auditor for the CPA firm of Agler and Carl, you encounter the following situations
in auditing different clients.

1. Desi Corporation is a closely held corporation whose stock is not publicly traded. On
December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value common
stock. The owners’ asking price for the land was $120,000, and the fair market value of
the land was $110,000.
2. Lucille Corporation is a publicly held corporation whose common stock is traded on the
securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par value
stock. At the time of the exchange, the land was advertised for sale at $250,000.The stock was
selling at $11 per share.

Prepare the journal entries for each of the situations above.

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.

Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’
equity and outstanding shares. Use the following column headings: Before Action,After
Stock Dividend, and After Stock Split.

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.

(a) Journalize the transactions.
(b) Prepare the adjusting entry for the accrual of interest at December 31.

E12-10 At December 31, 2011, the trading securities for Natoli, Inc. are as follows.

Security  Cost   Fair Value 
A  17,500  16,000
B  12,500  14,000
C  23,000  19,000
   53,000  49,000
(a) Prepare the adjusting entry at December 31, 2011, to report the securities at fair value.
(b) Show the balance sheet and income statement presentation at December 31, 2011, after
adjustment to fair value.

E12-13 On January 1, 2011, Lennon Corporation acquires 100% of Ono Inc. for $220,000 in
cash.The condensed balance sheets of the two corporations immediately following the acquisition
are as follows.

  Lennon Corporation Ono Inc.
Current assets  60,000  50,000
Investment in Ono Inc. Common stock  220,000
Plant and equipment (net)  300,000  220,000
   580,000  270,000
Current liabilities  180,000  50,000
Common Stock  230,000  80,000
Retained earnings  170,000  140,000
   580,000  270,000
Prepare a worksheet for a consolidated balance sheet

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