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ACC291 Week 3 E9-7 E10-5 E10-10 E10-11 E10-15 ....

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• Exercise E9-7
• Exercise E10-5
• Exercise E10-10
• Exercise E10-11
• Exercise E10-15
• Exercise E10-18
• Problem P10-5A
• Problem P10-9A

ACC291 Week 3 E9-7 E10-5 E10-10 E10-11 E10-15 E10-18 P10-5A P10-9A

Question 1
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 2011 and 2012 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 2011 depreciation.
(2) Show how the truck would be reported in the December 31, 2011, balance sheet.

Question 2
Don Walls’s gross earnings for the week were $1,780, his federal income tax withholding
was $301.63, and his FICA total was $135.73.

Instructions
(a) What was Walls’s net pay for the week?
(b) Journalize the entry for the recording of his pay in the general journal. (Note: Use Salaries
Payable; not Cash.)
(c) Record the issuing of the check for Walls’s pay in the general journal.

Question 3
On January 1, Neuer Company issued $500,000, 10%, 10-year bonds at par. Interest is
payable semiannually on July 1 and January 1.

Instructions

Present journal entries to record the following.

(a) The issuance of the bonds.

(b) The payment of interest on July 1, assuming that interest was not accrued on June 30.

(c) The accrual of interest on December 31

Question 4
On January 1, Flory Company issued $300,000, 8%, 5-year bonds at face value.
Interest is payable semiannually on July 1 and January 1.

Instructions
Prepare journal entries to record the following events.
(a) The issuance of the bonds.
(b) The payment of interest on July 1, assuming no previous accrual of interest.
(c) The accrual of interest on December 31.

Question 5
Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable to
finance the construction of a building at December 31, 2011. The terms provide for semiannual
installment payments of $20,000 on June 30 and December 31.

Instructions
Prepare the journal entries to record the mortgage loan and the first two installment payments

Question 6
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.

Question 7
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.

Question 8
Elkins Company sold $2,500,000, 8%, 10-year bonds on July 1, 2011.The bonds were
dated July 1, 2011, and pay interest July 1 and January 1. Elkins Company uses the straight-line
method to amortize bond premium or discount. Assume no interest is accrued on June 30.

Instructions
(a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest
expense for 2011, assuming that the bonds sold at 104.
(b) Prepare journal entries as in part (a) assuming that the bonds sold at 98.
(c) Show balance sheet presentation for each bond issue at December 31, 2011.

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