On January 1, 2021, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2022. The 2021 income statement reported $2,200 in interest revenue from this note and a $6,000 gain on sale of investment in stock. The stock’s book value was $16,000. The company’s fiscal year ends on December 31.Required:1. What is the note’s effective interest rate?2. Reconstruct the journal entries to record the sale of the stock on January 1, 2021, and the adjusting entry to record interest revenue at the end of 2021. The company records adjusting entries only at year-end.
Q: Santiago Corporation's board of directors declared a P750,000 cash dividend on Sept. 1, 2019,…
A: The entity declares its dividend in the board meeting of the entity and uses the free reserve…
Q: On January 1, 2021, Illuminati Company purchased 10% bonds with a face amount of P3,000,000. The…
A: Formulas that are used:-
Q: Hardstone Inc. had excess cash and invested it in the stock of Softrock, Inc. On August 5, 2021…
A: The excess cash available with the firm can be invested in financial assets for a short-term period…
Q: On January 1, 2019, Ola Company paid $388,900 for a $400,000 face value 3% corporate bond yielding…
A: Investment is the amount of money invested by an individual or entity in securities, shares and…
Q: On January 1, 2019, LEMON Company purchased bonds with face amount of ₱6,000,000 for ₱6,309,000. The…
A: Bonds:- A bond is a fixed income instrument that shows the loan amount paid by the investor to…
Q: On October 2, 2020, a company borrowed cash and signed a 3-year,interest-bearing note on which both…
A: The journal entries are prepared to keep the record of day to day transactions of the business.
Q: Presented below is selected information related to the financial instruments of Dawson Company at…
A: a. Determine Dawson's net income for 2020.
Q: Ray Company had the following liabilities on December 31, 2021: · Trade accounts payable, net…
A: Current liabilities: Liabilities that have to be paid within one year or one operating cycle,…
Q: On February 1, 2018, Bell Co. decides to invest excess cash of $16,800 by purchasing a Grant, Inc.…
A: Journal entry - It refers to the process where the business transactions are recorded in the books…
Q: Required: 1. Prepare the journal entries to record (a) issuance of the bonds by Western and (b)…
A: Bonds: Bonds are the fixed income instrument that provide regular interest income to its holders. It…
Q: In January 2021, Janeway Inc. doubled the amount of its outstanding stock by selling on the market…
A: Common stock: Common stock is the instrument used by the company for raising funds from the general…
Q: On January 1, 2018, the Apex Company exchanged some shares of common stock it had been holding as…
A: Effective annual interest rate: The effective annual interest rate is said to be the real return on…
Q: On April 1, 2021, Western Communications, Inc., issued 12% bonds, dated March 1, 2021, with face…
A: Solution A journal is used to record the business transation in chronological order. It has two…
Q: Amalgamated General Corporation is a consulting firm that also offers financial services through its…
A: Journal entry: It is the first step of recording transactions of a company. Before this, no other…
Q: An investor company purchased 180,000 shares of common stock of the investee company on January 2,…
A: If an investor in a firm has considerable control over the company's operations and practices, the…
Q: On December 31, 2020, McDaniel Company had $1,200,000 of short-term debt in the form of notes…
A: Definition: Liability: Liability is an agreement made by a company to pay a certain amount for the…
Q: At December 31, 2019, Wayne Company owned note payable of P1,950,000, due March 15, 2020. Wayne…
A: Current liabilities means the liabilities which is expected to be paid in next 12 months.…
Q: On December 31, 2020, Camiguin Company shows the following data with respect to its matured…
A: An equity swap is a trade of future cash flows between two parties that enables each party to…
Q: Meghan Markle Co. had a tax rate of 25% and reported net income of $3,400,000 for the fiscal year…
A: EPS termed as Earnings per share which is a figure that states the profit per share of stock…
Q: On January 1, 2019, Sasha Inc issued 10-year, P3,000,000 face value, 6% bonds, at par. Each P1,000…
A: Earnings per share are the amount per share which the shareholder earns after deducting the…
Q: On January 1, 2021, Illuminati Company purchased 10% bonds with a face amount of P3,000,000. The…
A: Bond Valuation Bond can be valued either in par value or in discount or in premium as well. The…
Q: On April 1, 2021, Western Communications, Inc., issued 12% bonds, dated March 1, 2021, with face…
A: Golden Rules of Accounting : Account Type Debit Credit Personal Account the receiver the giver…
Q: lio, and on March 1, 2022, the fair value had fallen to P500.000. b. A customer owing the company…
A: In the context of the given question, the events or transactions that have occurred before or…
Q: Midwest Bank invests in equity securities. At the beginning of December 2019, the bank held no…
A: Unrealized gains and losses: These are gains and losses which are unrealized and are the result of…
Q: At the financial statement date of December 31, 2019, the liabilities outstanding of Kingston…
A: Liabilities Amount Assets Amount Capital Share Capital 350000 Serial bonds…
Q: On April 1, 2021, Western Communications, Inc., issued 12% bonds, dated March 1, 2021, with face…
A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from…
Q: Berlin AG started business one year ago and reported the following account balances sheet on 31…
A: When bonds are issued at a price higher than the face value, they are said to be issued at premium.…
Q: 1. Prepare the journal entries to record (a) issuance of the bonds by Western and (b) Stillworth’s…
A: Journal enteries on the issuance of Bonds for the organisation Western and stillworth organisation.
Q: Neptune Corporation is preparing its December 31, 2018, balance sheet. The following items may be…
A: A balance sheet also called as 'statement of financial position'. It is one of the financial…
Q: In 2019, its first year of operations, Brighton Finance Corporation, based in London, UK, had the…
A: Short term investment can be referred to as the amount of investments which are made by an investor…
Q: The following information was provided by a company regarding its currently maturing obligations as…
A: Current liabilities (CL) refers to the term of accounting which states that all the business…
Q: On January 1, 2019, Swifty issued 10-year, $200,000 face value, 6% bonds at par. Each $1,000 bond is…
A: Prepare the journal entry on January 1, 2019, to record the issuance of the bonds:
Q: Amalgamated General Corporation is a consulting firm that also offers financial services through its…
A: The journal entry regarding the investment has been passed as under: Date Accounts title and…
Q: Amalgamated General Corporation is a consulting firm that also offers financial services through its…
A: As posted multiple sub parts we are answering only first three sub parts kindly repost the…
Q: Neptune Corporation is preparing its December 31, 2018, balance sheet. The following items may be…
A: Assets are resources owned by the business that will provide future benefits. Liabilities are the…
Q: Midwest Bank invests in equity securities. At the beginning of December 2019, the bank held no…
A: Solution:- 1)Preparation of journal entries to record the preceding information as follows:- Working…
Q: Rogers Corporation carries an account in its general ledger called Investments, which contained the…
A: Available for sale securities are the securities purchased with an intent to sell before their…
Q: In 2021 and 2022, Norman Company had the following transactions related to investments in bonds.…
A: Semi annual Interest 8% Bond issued by JS Inc = $ 400,000 x 8% x (6/12) = $ 16,000 12% Bond issued…
Q: On January 1, 2019, LEMON Company purchased bonds with face amount of ₱6,000,000 for ₱6,309,000. The…
A: Carrying value of bond = present value of all cashflows Bond will mature December 31st, 2021 hence,…
Q: On January 1, Cee Company's ordinary share capital amounted to P1,000,000, with P10 par value. On…
A: EPS is the monetary value of earnings per outstanding share of common stock.
Q: On April 1, 2021, Western Communications, Inc., issued 12% bonds, dated March 1, 2021, with face…
A: Journal Entry: It is the act of recording business transaction(either economic or non-economic)…
Q: On January 1, 2019, Ventionary issued bonds with an estimated value of 10 years, $ 3,000,000 (face…
A: Compute diluted earnings per share for 2019: Formula: net income after tax saving / total…
Q: Ray Company had the following liabilities on December 31, 2021: · Trade accounts payable, net…
A: Current liabilities: Liabilities that have to be paid within one year or one operating cycle,…
Q: At December 31, 2019, Wayne Company owned note payable of P1,950,000, due March 15, 2020. Wayne…
A: Current liabilities are those liabilities which are due within a year and are to repaid within a…
Q: The company established a stock appreciation rights program for the president. The program entitled…
A: Stock appreciation rights is also written as SAR. This program is linked with stock price. This is…
Q: Midwest Bank invests in equity securities. At the beginning of December 2019, the bank held no…
A: The following are journal entries to record the purchase of equity securities in cash: Investment in…
Q: Heinz Company’s post-closing trial balance as of December 31, 2018, and the adjusted trial balance…
A: Cash flow statement- The movement of cash or cash equivalents in a firm is represented by a cash…
Q: Ray Company had the following liabilities on December 31, 2021: · Trade accounts payable, net…
A: Current liabilities: Liabilities that have to be paid within one year or one operating cycle,…
Q: Davao Company was incorporated on July 1, 2021, with P2,000,000 from the issuance of shares and…
A: Answer) Calculation of Total Assets Total Assets = Total Liabilities + Shareholders’ Equity Total…
Q: On July 1, 2019, Prime Company borrowed P320,000 to purchase 80% of the outstanding common stock of…
A: On 01.07.2019, Prime company borrowed amount = P320000 This amount is borrowed to purchase the…
On January 1, 2021, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2022. The 2021 income statement reported $2,200 in interest revenue from this note and a $6,000 gain on sale of investment in stock. The stock’s book value was $16,000. The company’s fiscal year ends on December 31.
Required:
1. What is the note’s effective interest rate?
2. Reconstruct the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- On January 1, 2019, Kittson Company had a retained earnings balance of 218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of 67,000, and the following events occurred: 1. Cash dividends of 3 per share on 4,000 shares of common stock were declared and paid. 2. A small stock dividend was declared and issued. The dividend consisted of 600 shares of 10 par common stock. On the date of declaration, the market price of the companys common stock was 36 per share. 3. The company recalled and retired 500 shares of 100 par preferred stock. The call price was 125 per share; the stock had originally been issued for 110 per share. 4. The company discovered that it had erroneously recorded depreciation expense of 45,000 in 2018 for both financial reporting and income tax reporting. The correct depreciation for 2018 should have been 20,000. This is considered a material error. Required: 1. Prepare journal entries to record Items 1 through 4. 2. Prepare Kittsons statement of retained earnings for the year ended December 31, 2019.Frost Company has accumulated the following information relevant to its 2019 earningsper share. 1. Net income for 2019: 150,500. 2. Bonds payable: On January 1, 2019, the company had issued 10%, 200,000 bonds at 110. The premium is being amortized in the amount of 1,000 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 3. Bonds payable: On December 31, 2017, the company had issued 540,000 of 5.8% bonds at par. Each 1,000 bond is currently convertible into 11.6 shares of common stock. To date, no bonds have been converted. 4. Preferred stock: On July 3, 2018, the company had issued 3,800 shares of 7.5%, 100 par, preferred stock at 108 per share. Each share of preferred stock is currently convertible into 2.45 shares of common stock. To date, no preferred stock has been converted and no additional shares of preferred stock have been issued. The current dividends have been paid. 5. Common stock: At the beginning of 2019, 25,000 shares were outstanding. On August 3, 7,000 additional shares were issued. During September, a 20% stock dividend was declared and issued. On November 30, 2,000 shares were reacquired as treasury stock. 6. Compensatory share options: Options to acquire common stock at a price of 33 per share were outstanding during all of 2019. Currently, 4,000 shares may be acquired. To date, no options have been exercised. The unrecognized compens Frost Company has accumulated the following information relevant to its 2019 earnings ns is 5 per share. 7. Miscellaneous: Stock market prices on common stock averaged 41 per share during 2019, and the 2019 ending stock market price was 40 per share. The corporate income tax rate is 30%. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Indicate which earnings per share figure(s) Frost would report on its 2019 income statement.Monona Company reported net income of 29,975 for 2019. During all of 2019, Monona had 1,000 shares of 10%, 100 par, nonconvertible preferred stock outstanding, on which the years dividends had been paid. At the beginning of 2019, the company had 7,000 shares of common stock outstanding. On April 2, 2019, the company issued another 2,000 shares of common stock so that 9,000 common shares were outstanding at the end of 2019. Common dividends of 17,000 had been paid during 2019. At the end of 2019, the market price per share of common stock was 17.50. Required: 1. Compute Mononas basic earnings per share for 2019. 2. Compute the price/earnings ratio for 2019.
- Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1, 000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50, 000 to retire bonds with a face value (and book value) of 50, 000. e. On July 2, 2019, Farrell purchased equipment for 63, 000 cash. f. On December 31, 2019, land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows. (Appendix 21.1) Spreadsheet and Statement Refer to the information for Farrell Corporation in P21-13. Required: 1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows. (Hint: Combine the income statement and December 31, 2019, balance sheet items for the adjusted trial balance. Use a retained earnings balance of 291,000 in this adjusted trial balance.) 2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1,000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50,000 to retire bonds with a face value (and book value) of 50,000. e. On July 2, 2019, Farrell purchased equipment for 63,000 cash. f. On December 31, 2019. land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows.Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
- Roseau Company is preparing its annual earnings per share amounts to be disclosed on its 2019 income statement. It has collected the following information at the end of 2019: 1. Net income: 120,400. Included in the net income is income from continuing operations of 130,400 and a loss from discontinued operations (net of income taxes) of 10,000. Corporate income tax rate: 30%. 2. Common stock outstanding on January 1, 2019: 20,000 shares. 3. Common stock issuances during 2019: July 6, 4,000 shares; August 24, 3,000 shares. 4. Stock dividend: On October 19, 2019, the company declared a 10% stock dividend that resulted in 2,700 additional outstanding shares of common stock. 5. Common stock prices: 2019 average market price, 30 per share; 2019 ending market price, 27 per share. 6. 7% preferred stock outstanding on January 1, 2019: 1,000 shares. Terms: 100 par, nonconvertible. Current dividends have been paid. No preferred stock issued during 2019. 7. 8% convertible preferred stock outstanding on January 1, 2019: 800 shares. The stock was issued in 2018 at 130 per share. Each 100 par preferred stock is currently convertible into 1.7 shares of common stock. Current dividends have been paid. To date, no preferred stock has been converted. 8. Bonds payable outstanding on January 1, 2019: 100,000 face value. These bonds were issued several years ago at 97 and pay annual interest of 9.6%. The discount is being amortized in the amount of 300 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 9. Compensatory share options outstanding: Key executives may currently acquire 3,000 shares of common stock at 20 per share. The options were granted in 2018. To date, none have been exercised. The unrecognized compensation cost (net of tax) related to the options is 4 per share. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Show how Roseau would report these earnings per share figures on its 2019 income statement. Include an explanatory note to the financial statements.Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000
- Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.The controller of Red Lake Corporation has requested assistance in determining income, basic earnings per share, and diluted earnings per share for presentation on the companys income statement for the year ended September 30, 2020. As currently calculated, Red Lakes net income is 540,000 for fiscal year 2019-2020. Your working papers disclose the following opening balances and transactions in the companys capital stock accounts during the year: 1. Common stock (at October 1, 2019, stated value 10, authorized 300,000 shares; effective December 1, 2019, stated value 5, authorized 600,000 shares): Balance, October 1, 2019issued and outstanding 60,000 shares December 1, 201960,000 shares issued in a 2-for-l stock split December 1, 2019280,000 shares (stated value 5) issued at 39 per share 2. Treasury stockcommon: March 3, 2020purchased 40,000 shares at 38 per share April 1, 2020sold 40,000 shares at 40 per share 3. Noncompensatory stock purchase warrants, Series A (initially, each warrant was exchangeable with 60 for 1 common share; effective December 1, 2019, each warrant became exchangeable for 2 common shares at 30 per share): October 1, 201925,000 warrants issued at 6 each 4. Noncompensatory stock purchase warrants, Series B (each warrant is exchangeable with 40 for 1 common share): April 1, 202020,000 warrants authorized and issued at 10 each 5. First mortgage bonds, 5%, due 2029 (nonconvertible; priced to yield 5% when issued): Balance October 1, 2019authorized, issued, and outstandingthe face value of 1,400,000 6. Convertible debentures, 7%, due 2036 (initially, each 1,000 bond was convertible at any time until maturity into 20 common shares; effective December 1, 2019, the conversion rate became 40 shares for each bond): October 1, 2019authorized and issued at their face value (no premium or discount) of 2,400,000 The following table shows the average market prices for the companys securities during 2019-2020: Adjusted for stock split Required: Prepare a schedule computing: 1. the basic earnings per share 2. the diluted earnings per share that should be presented on Red Lakes income statement for the year ended September 30, 2020 A supporting schedule computing the numbers of shares to be used in these computations should also be prepared. Assume an income tax rate of 30%.