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Bartleby Sitemap - Textbook Solutions

All Textbook Solutions for College Accounting, Chapters 1-27

JOURNAL ENTRIES (ACCRUED INTEREST RECEIVABLE) At the end of the year, the following interest is earned, but not yet received. Record the adjusting entry in a general journal. Interest on 6,000, 60-day, 5.5% note (for 24 days) 22.00 Interest on 9,000, 90-day, 6% note (for 12 days) 18.00 40.00 JOURNAL ENTRIES (NOTE ISSUED, RENEWED, AND PAID) Prepare general journal entries for the following transactions:JOURNAL ENTRIES (NOTE ISSUED FOR BANK LOAN) Prepare general journal entries for the following transactions: Sept. 15 Borrowed 7,000 cash from the bank, giving a 60-day non- interest- bearing note. The note is discounted 8 % by the bank. Nov. 14 Paid the 7,000 note, recognizing the discount as interest expense.JOURNAL ENTRIES (ACCRUED INTEREST PAYABLE) At the end of the year, the following interest is payable, but not yet paid. Record the adjusting entry in the general journal. Interest on 8,000, 90-day, 8% note (for 18 days) 32.00 Interest on 4,500, 60-day, 7% note (for 7 days) 6.13 38.13 NOTES RECEIVABLE ENTRIES M. L. DiMaurizio had the following notes receivable transactions: REQUIRED Record the transactions in a general journal.NOTES RECEIVABLE DISCOUNTING Madison Graphics had the following notes receivable transactions: REQUIRED Record the transactions in a general journal.ACCRUED INTEREST RECEIVABLE The following is a list of outstanding notes receivable as of December 31, 20--: REQUIRED 1. Compute the accrued interest at the end of the year. 2. Prepare the adjusting entry in the general journal.13SPB ACCRUED INTEREST PAYABLE The following is a list of outstanding notes payable as of December 31, 20--: REQUIRED 1. Compute the accrued interest at the end of the year. 2. Prepare the adjusting entry in the general journal.1MYW Rochelle needed to borrow 3,000 for three months in order to pay for college expenses while waiting for her scholarship to arrive. After Rochelle filled out the loan application, the loan officer at the bank asked her if she would like to pay the interest up front or at the maturity of the note. He went on to explain that it didnt make a difference, but he preferred that she pay it up front because it would make his paperwork easier. He also told Rochelle that the interest rate and amount would be the same. Rochelle agreed, signed the three-month, 8%, discounted note and left with a check for 2,940. 1. Did the loan officer offer Rochelle an acceptable explanation of the interest rate? Justify your answer. 2. What is the effective rate of interest on Rochelles loan? Round to the nearest tenth of a percent. 3. In a short paragraph, explain the difference between an interest-bearing note and a discounted note. 4. In groups of two or three, discuss some common situations where the average person might misunderstand interest rate quotations.Eddie Edwards and Phil Bell own and operate The Second Hand Equipment Shop. The following transactions involving notes and interest were completed during the last three months or 20--: REQUIRED 1. Prepare general journal entries for the transactions. 2. Prepare necessary adjusting entries for the notes outstanding on December 31.1CP 1TF 2TF Depreciation is a process of asset valuation; that is, book value is the same as true asset value.The straight-line method of depreciation allocates the cost of an asset more rapidly than the sum-of-the-years-digits method.5TF 1MC 2MC 3MC 4MC 5MC The following costs were incurred to purchase a machine: Purchase price 50,000 Transportation costs 800 Insurance during transportation 100 Interest on loan during first month of assets use 250 Determine the acquisition cost.2CE A machine costing 350,000 has a salvage value of 15,000 and an estimated life of three years. Prepare depreciation schedules reporting the depreciation expense, accumulated depreciation, and book value of the machine for each year under the double-declining-balance and sum-of-the-years-digits methods. For the double-declining-balance method, round the depreciation rate to two decimal places.Grandorf Company replaced the engine in a truck for 8,000 and expects the new engine will extend the life of the truck two years beyond the original estimated life. Related information is provided below. Cost of truck 65,000 Salvage value 5,000 Original estimated life 6 years The truck was purchased on January 1, 20-1. The engine was replaced on January 1, 20-6. Using straight-line depreciation, compute depreciation expense for 20-6.Prepare journal entries for the following transactions: a. A machine with a cost of 10,000 and accumulated depreciation of 8,000 was sold for 2,500. b. A machine with a cost of 10,000 and accumulated depreciation of 8,000 was traded for a new machine with a market value of 12,000. Cash of 9,500 was also paid.6CE 7CE 1RQ 2RQ 3RQ What is meant by the depreciable cost of a plant asset?5RQ 6RQ 7RQ For assets acquired after 1986, but before September 27, 2017, what depreciation methods are allowed for federal income tax purposes?9RQ 10RQ 11RQ 12RQ 13RQ 14RQ 15RQ 16RQ 17RQ 18RQ 19RQ 20RQ 21RQ 22RQ 23RQ 1SEA STRAIGHT-LINE, DECLINING-BALANCE, AND SUM-OF-THE-YEARS-DIGITS METHODS A light truck is purchased on January 1 at a cost of 35,000. It is expected to serve for eight years and have a salvage value of 5,000. Calculate the depreciation expense for the first and third years of the trucks life using the following methods: 1. Straight-line 2. Double-declining-balance (round to two decimal places) 3. Sum-of-the-years-digits (round to two decimal places)UNITS-OF-PRODUCTION METHOD The truck purchased in Exercise 18-2A is expected to be used for 100,000 miles over its eight-year useful life. Using the units-of-production method, calculate the depreciation expense for the first and third years of use if the truck is driven 20,000 miles in year 1 and 24,000 miles in year 3.4SEA JOURNAL ENTRIES: DISPOSITION OF PLANT ASSETS Prepare the entries for the following transactions using a general journal: 1. Discarding an asset. (a) On January 4, shelving units, which had a cost of 6,400 and had accumulated depreciation of 5,900, were discarded. (b) On June 15, a hand cart, which had a cost of 1,500 and had accumulated depreciation of 1,350, was sold for 150. (c) On October 1, a copy machine, which had a cost of 7,200 and had accumulated depreciation of 6,800, was sold for 450. 2. Exchange or trade-in of assets. (a) On December 31, a drill press, which had a cost of 60,000 and had accumulated depreciation of 48,000, was traded in for a new drill press with a fair market value of 75,000. The old drill press and 65,000 in cash were given for the new drill press. (b) On December 31, the old drill press in (a) and 60,000 in cash were given for the new drill press.6SEA STRAIGHT-LINE, DECLINING-BALANCE, SUM-OF-THE-YEARS-DIGITS, AND MACRS METHODS A machine is purchased January 1 at a cost of 59,000. It is expected to serve for eight years and have a salvage value of 3,000. REQUIRED 1. Prepare a schedule showing depreciation for each of the eight years and the book value at the end of each year using the following methods: (a) Straight-line (b) Double-declining-balance (round to two decimal places) (c) Sum-of-the-years'-digits (round to two decimal places) 2. Assuming a seven-year class of property, compute MACRS depreciation expense for each year of the assets life.UNITS-OF-PRODUCTION METHOD A machine is purchased January 1 at a cost of 59,000. It is expected to produce 130,000 units and have a salvage value of 3,000 at the end of its useful life. Units produced are as follows: REQUIRED Prepare a schedule showing depreciation for each year and the book value at the end of each year using the units-of-production method (round calculations to two decimal places).CALCULATING AND JOURNALIZING DEPRECIATION Equipment records for Johnson Machine Co. for the year follow. Johnson Machine uses the straight-line method of depreciation. In the case of assets acquired by the fifteenth day of the month, depreciation should be computed for the entire month. In the case of assets acquired after the fifteenth day of the month, no depreciation should be considered for the month in which the asset was acquired. REQUIRED 1. Calculate the depreciation expense for Johnson Machine as of December 31, 20--. 2. Prepare the entry for depreciation expense using a general journal.IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, two flight simulators were purchased by a space camp for 77,000 each with a salvage value of 5,000 each and estimated useful lives of eight years. On January 1, 20-2, the hydraulic system for Simulator A was replaced for 6,000 cash and an updated computer for more advanced students was installed in Simulator B for 9,000 cash. The hydraulic system is expected to extend the life of Simulator A three years beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Simulators A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each simulator for 20-2 through 20-8.DISPOSITION OF ASSETS: JOURNALIZING Mitchell Parts Co. had the following plant asset transactions during the year: 1. Assets discarded or sold: Jan. 1 Motor #12, which had a cost of 2,800 and accumulated depreciation of 2,800, was discarded. 8 Motor #8, which had a cost of 4,400 and accumulated depreciation of 4,000, was sold for 200. 14 Motor #16, which had a cost of 5,600 and accumulated depreciation of 5,400, was sold for 450. 2. Assets exchanged or traded in: Feb. 1 Motor #6, which had a cost of 6,000 and accumulated depreciation of 4,800, was traded in for a new motor (#22) with a fair market value of 7,000. The old motor and 5,600 in cash were given for the new motor. 9 Motor #9, which had a cost of 5,500 and accumulated depreciation of 5,000, was traded in for a new motor (#23) with a fair market value of 6,500. The old motor and 6,200 in cash were given for the new motor. REQUIRED Prepare general journal entries for the transactions.DEPLETION: CALCULATING AND JOURNALIZING Mineral Works Co. acquired a salt mine at a cost of 1,700,000, with no expected salvage value. The estimated number of units available for production from the mine is 3,400,000 tons. (a) During the first year, 200,000 tons are mined and sold. (b) During the second year, 600,000 tons are mined and sold. REQUIRED 1. Calculate the amount of depletion expense for both years. 2. Prepare general journal entries for depletion expense.INTANGIBLE LONG-TERM ASSETS Track Town Co. had the following transactions involving intangible assets: Jan. 1 Purchased a patent for leather soles for 10,000 and estimated its useful life to be 10 years. Apr. 1 Purchased a copyright for a design for 15,000 with a life left on the copyright of 25 years. The estimated remaining (economic) life of the copyright is five years. July 1 Signed a five-year franchise agreement and opened a Starting Line high-tech running shoe store. Paid 50,000 to the franchisor. REQUIRED 1. Using the straight-line method, calculate the amortization of the patent, copyright, and franchise. 2. Prepare general journal entries to record the end-of-year amortizations.1SEB STRAIGHT-LINE, DECLINING-BALANCE, AND SUM-OF-THE-YEARS-DIGITS METHODS A light truck is purchased on January 1 at a cost of 19,000. It is expected to serve for five years and have a salvage value of 1,000. Calculate the depreciation expense for the first and third years of the trucks life using the following methods: 1. Straight-line 2. Double-declining-balance 3. Sum-of-the-years-digits 3SEB 4SEB JOURNAL ENTRIES: DISPOSITION OF PLANT ASSETS Prepare the entries for the following transactions using a general journal: 1. Discarding an asset. (a) On January 4, shelving units, which had a cost of 7,200 and accumulated depreciation of 6,900, were discarded. (b) On June 15, a hand cart, which had a cost of 2,500 and accumulated depreciation of 2,250, was sold for 250. (c) On October 1, a copy machine, which had a cost of 5,200 and accumulated depreciation of 4,800, was sold for 500. 2. Exchange or trade-in of assets. (a) On December 31, a drill press, which had a cost of 50,000 and accumulated depreciation of 37,500, was traded in for a new drill press with a fair market value of 55,000. The old drill press and 40,000 in cash were given for the new drill press. (b) On December 31, the old drill press in (a) and 45,000 in cash were given for the new drill press.6SEB STRAIGHT-LINE, DECLINING-BALANCE, SUM-OF-THE-YEARS'-DIGITS, AND MACRS METHODS A machine is purchased January 1 at a cost of 77,000. It is expected to serve for eight years and have a salvage value of 5,000. REQUIRED 1. Prepare a schedule showing depreciation for each of the eight years and the book value at the end of each year using the following methods: (a) Straight-line (b) Double-declining-balance (round to two decimal places) (c) Sum-of-the-years'-digits (round to two decimal places) 2. Assuming a seven-year class of property, compute MACRS depreciation expense for each year of the assets life.UNITS-OF-PRODUCTION METHOD A machine is purchased January 1 at a cost of 58,000. It is expected to produce 110,000 units and have a salvage value of 3,000 at the end of its useful life. REQUIRED Prepare a schedule showing depreciation for each year and the book value at the end of each year using the units-of-production method.CALCULATING AND JOURNALIZING DEPRECIATION Equipment records for Byerly Construction Co. for the year follow. Byerly Construction uses the straight-line method of depreciation. In the case of assets acquired by the fifteenth day of the month, depreciation should be computed for the entire month. In the case of assets acquired after the fifteenth day of the month, no depreciation should be considered for the month in which the asset was acquired. REQUIRED 1. Calculate the depreciation expense for Byerly Construction as of December 31, 20--. 2. Prepare the entry for depreciation expense using a general journal.IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each jackhammer for 20-2 through 20-4.DISPOSITION OF ASSETS: JOURNALIZING Mayer Delivery Co. had the following plant asset transactions during the year: 1. Assets discarded or sold: Jan. 1 Van #11, which had a cost of 8,800 and accumulated depreciation of 8,800, was discarded. 8 Van #7, which had a cost of 9,400 and accumulated depreciation of 9,000, was sold for 200. 14 Van #13, which had a cost of 7,600 and accumulated depreciation of 7,400, was sold for 250. 2. Assets exchanged or traded in: Feb. 1 Van #8, which had a cost of 11,000 and accumulated depreciation of 8,800, was traded in for a new van (#20) with a fair market value of 13,000. The old van and 10,500 in cash were given for the new van. 9 Van #3, which had a cost of 7,500 and accumulated depreciation of 7,000, was traded in for a new van (#21) with a fair market value of 9,500. The old van and 9,200 in cash were given for the new van. REQUIRED Prepare general journal entries for the transactions.DEPLETION: CALCULATING AND JOURNALIZING Mining Works Co. acquired a copper mine at a cost of 1,200,000, with no expected salvage value. The estimated number of units available for production from the mine is 3,000,000 tons. (a) During the first year, 400,000 tons are mined and sold. (b) During the second year, 700,000 tons are mined and sold. REQUIRED 1. Calculate the amount of depletion expense for both years. 2. Prepare general journal entries for depletion expense.13SPB 1MYW Creative Solutions purchased a patent from Russell Lazarus, an inventor. At the time of the purchase, the patent had two years remaining. The president of Creative Solutions decided to have the accountant amortize the cost of the patent, 200,000, over 10 years rather than two years. His reasoning was that the 200,000 has already been spent and stockholders might ask a lot of questions about a 100,000 expense showing up on the income statement but probably wouldnt pay much attention to a 20,000 expense. 1. What is Creative Solutions ethical responsibility to the companys stockholders? 2. According to GAAP, how should the amortization of patents be treated? 3. Write a short paragraph explaining similarities and differences between plant assets and intangible assets. 4. In groups of two or three, determine an appropriate method of depreciation, depletion, or amortization of the following assets for financial reporting purposes: (a) a car used as a taxi, (b) a parcel of land that will be resold in a few years, (c) a computer that has a very short life and loses most of its value in the first year or two, (d) an ore mine, and (e) research and development costs incurred to develop a trademark.On April 1, 20-3, Kwik Kopy Printing purchased a copy machine for $50,000. The estimated life of the machine is five years, and it has an estimated salvage value of $5,000. The machine was used until July 1, 20-6. REQUIRED Assume that Kwik Kopy uses straight-line depreciation and prepare the following entries: Adjusting entries for depreciation on December 31 of 20-3 through 20-5. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine. Assume that Kwik Kopy uses sum-of-the-years digits depreciation and prepare the following entries: Adjusting entries for depreciation on December 31, 20-3 through 20-5. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine. 1CP 1TF 2TF 3TF 4TF 5TF 1MC 2MC 3MC 4MC 5MC 1CE 2CE 3CE 4CE 5CE 1RQ 2RQ 3RQ 4RQ 5RQ 6RQ 7RQ 8RQ 9RQ 1SEA 2SEA 3SEA 4SEA ENTRIES: PARTNERSHIP LIQUIDATION On liquidation of the partnership of J. Hui and K. Cline, as of November 1, 20--, inventory with a book value of 180,000 is sold for 230,000. Given that Hui and Cline share profits and losses equally, prepare the entries for the sale and the allocation of gain.6SPA 7SPA 8SPA 9SPA STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS After several years of operations, the partnership of Nelson, Pope, and Williams is to be liquidated. After making closing entries on March 31, 20--, the following accounts remain open: REQUIRED 1. Prepare a statement of partnership liquidation for the period July 120, 20--, showing the following: (a) The sale of noncash assets on July 1 (b) The allocation of any gain or loss to the partners on July 1 (c) The payment of the liabilities on July 15 (d) The distribution of cash to the partners on July 20 2. Journalize these four transactions in a general journal.1SEB 2SEB 3SEB 4SEB 5SEB 6SPB 7SPB ENTRIES FOR DISSOLUTION OF PARTNERSHIP Cummings and Stickel Construction Company, a partnership, is operating a general contracting business. Ownership of the company is divided among the partners, Katie Cummings, Julie Stickel, Roy Hewson, and Patricia Weber. Profits and losses are shared equally. The books are kept on the calendar-year basis. On August 10, after the business had been in operation for several years, Patricia Weber passed away. Mr. Weber wished to sell his wifes interest for 30,000. After the books were closed, the partners capital accounts had credit balances as follows: REQUIRED 1. Prepare the general journal entry required to enter the check issued to Mr. Weber in payment of his deceased wifes interest in the partnership. According to the partnership agreement, the difference between the amount paid to Mr. Weber and the book value of Patricia Webers capital account is allocated to the remaining partners based on their ending capital account balances. 2. Assume instead that Mr. Weber is paid 60,000 for the book value of Patricia Webers capital account. Prepare the necessary journal entry. 3. Assume instead that Julie Stickel (with the consent of the remaining partners) purchased Webers interest for 70,000 and gave Mr. Weber a personal check for that amount. Prepare the general journal entry for the partnership only.9SPB STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS After several years of operations, the partnership of Delco, Smith, and Walker is to be liquidated. After making closing entries on March 31, 20--, the following accounts remain Open. The noncash assets are sold for 165,000. Profits and losses are shared equally. REQUIRED 1. Prepare a statement of partnership liquidation for the period April 115, 20--, showing the following: (a) The sale of noncash assets on April 1 (b) The allocation of any gain or loss to the partners on April 1 (c) The payment of the liabilities on April 12 (d) The distribution of cash to the partners on April 15 2. Journalize these four transactions in a general journal.1MYW 1EC 1MP 1CP 1COP 1TF 2TF Dividends are not taxable because these earnings have already been taxed to the corporation.4TF 5TF 1MC 2MC 3MC Stock subscriptions receivable are listed as __________ on the balance sheet. (a) current liabilities (b) current assets (c) long-term assets (d) contra-stockholders equity Treasury stock is listed as a(n) __________ on the balance sheet. (a) current liability (b) current asset (c) deduction from stockholders equity (d) addition to stockholders equity 1CE Genous Company has 20,000 shares of common stock and 2,000 shares of cumulative, 20 par, 1 dividend, preferred stock outstanding. No dividends were declared in year 1 of operation. In year 2, 9,000 is available for dividends. Compute the dividends per share for common stock and preferred stock in year 2.Prepare general journal entries for the following transactions of GOTE Company: (a) Received subscriptions for 10,000 shares of 2 par common stock for 80,000. (b) Received payment of 30,000 on the stock subscription in transaction (a). (c) Received the balance in full for the stock subscription in transaction (a) and issued the stock. (d) Purchased 1,000 shares of its own 2 par common stock for 7.50 a share. (e) Sold 500 shares of the stock on transaction (d) for 8.50 a share.Prepare the stockholders equity section of the balance sheet based on the following account balances: Common stock, 2 par, 60,000 shares 120,000 Preferred stock, 10 par, 5%, 4,000 shares 40,000 Common stock subscribed, 2 par, 3,000 shares 6,000 Retained earnings 17,000 The answers to the Self-Study Test Questions are at the end of the chapter (pages 811812).1RQ 2RQ 3RQ 4RQ 5RQ If a corporation issues only one class of stock, what four rights does each stockholder have?7RQ 8RQ How is common stock subscriptions receivable usually reported on the balance sheet?10RQ 11RQ ORGANIZATION COSTS BB Electric decided to incorporate and has incurred the following costs of organizing: Incorporation fees 400 Attorneys fees 4,800 Promotion expenses 5,700 Prepare the entry for the payment of these organization costs for cash on January 31.DIVIDEND ALLOCATIONS Situation 1 Nguyen Company has the following stock outstanding: Common Stock Preferred Stock 60,000 shares 5,000 shares 1 par value 60 par, 3 dividend The amount available for dividends this year is 57,000. Prepare the dividend allocation between the preferred and common shares in total and per share. Situation 2 Bell Company has the following stock outstanding: Common Stock Preferred Stock 60,000 shares Cumulative: 2,000 shares 50 par, 2 dividend 1 par value Noncumulative: 3,000 shares 50 par, 2 dividend No dividends were declared in year 1 of operation. In year 2, there is 38,000 available for dividends. Prepare the dividend allocation between the preferred and common shares in total and per share.STOCK ISSUANCE (PAR, NO-PAR, AND STATED VALUE) The following independent stock transactions occurred during January 20-- for various corporations: (a) Issued 6,000 shares of 10 par common stock for 60,000 cash. (b) Issued 4,000 shares of 10 par common stock for 52,000 cash. (c) Issued 5,000 shares of no-par common stock for 55,000 cash. (d) Issued 4,000 shares of no-par common stock for 42,000 cash. (e) Issued 6,000 shares of no-par common stock with a stated value of 8 per share for 48,000 cash. (f) Issued 3,000 shares of no-par common stock with a stated value of 8 per share for 25,000 cash. Prepare general journal entries for these transactions, identifying each by letter.4SEA STOCKHOLDERS EQUITY SECTION After closing its books on December 31, Pro Parts stockholders equity accounts had the following balances: Common stock subscriptions receivable 5,000 Common stock, 5 par, 12,000 shares 60,000 Preferred stock, 10 par, 4%, 4,000 shares 40,000 Common stock subscribed, 5 par, 3,000 shares 15,000 Paid-in capital in excess of par-common stock 4,000 Retained earnings 35,000 Prepare the stockholders equity section of the balance sheet.PAR AND NO-PAR, COMMON AND PREFERRED STOCK Hernandez Company had the following stock transactions during its first 5 years of operations: (a) Issued 25,000 shares of 1 par common stock for 25,000 cash. (b) Issued 20,000 shares of 1 par common stock for 22,000 cash. (c) Issued 2,000 shares of 50 par, 8% preferred stock for 100,000 cash. (d) Issued 1,000 shares of 50 par, 8% preferred stock for 51,500 cash. (e) Issued 2,500 shares of no-par common stock for 11,875 cash. (f) Issued 1,500 shares of no-par, 7 preferred stock for 72,000 cash. REQUIRED 1. Prepare general journal entries for these transactions, identifying each by letter. 2. Assume that stock transactions a, b, and c occurred in year 1. The amount available for dividends at the end of year 1 is 26,000. Prepare the dividend allocation between the preferred and common shares in total and per share for year 1.STATED VALUE, COMMON AND PREFERRED STOCK, AND NONCASH ASSETS Kris Kraft Stores had the following stock transactions during the year: (a) Issued 8,000 shares of no-par common stock with a stated value of 5 per share for 40,000 cash. (b) Issued 6,000 shares of no-par common stock with a stated value of 5 per share for 33,000 cash. (c) Issued 5,000 shares of no-par, 6% preferred stock with a stated value of 15 per share for 75,000 cash. (d) Issued 10,000 shares of 5 par common stock for land with a fair market value of 50,000. (e) Issued 20,000 shares of 5 par common stock with a 7 fair market value for a building with an uncertain fair market value. (f) Issued 8,000 shares of 50 par, 8% preferred stock for land with a fair market value of 405,000. REQUIRED Prepare general journal entries for these transactions, identifying each by letter.STOCK SUBSCRIPTIONS Juneau Associates had the following stock transactions during the year: (a) Received subscriptions for 100,000 shares of 1 par common stock for 105,000. (b) Received subscriptions for 5,000 shares of 15 par, 8% preferred stock for 80,000. (c) Received a payment of 55,000 on the common stock subscription. (d) Received a payment of 40,000 on the preferred stock subscription. (e) Issued 40,000 shares of 1 par common stock in exchange for a truck with a fair market value of 48,000. (f) Received the balance in full for the common stock subscription and issued the stock. (g) Received the balance in full for the preferred stock subscription and issued the stock. REQUIRED Prepare general journal entries for these transactions, identifying each by letter.STOCK SUBSCRIPTIONS AND TREASURY STOCK Nash Roth formed a corporation and had the following organization costs and stock transactions during the year: June 30 Incurred the following costs of incorporation: Incorporation fees 800 Attorney's fees 9,000 Promotion fees 8,000 July 15 Issued 7,000 shares of 10 par common stock for 73,000 cash. Aug. 1 Received subscriptions for 8,000 shares of 10 par common stock for 81,500. 15 Issued 16,000 shares of 10 par common stock in exchange for a building and fixtures with a fair market value of 165,000. 31 Received a payment of 51,500 for the common stock subscription. Sept. 3 Purchased 2,000 shares of its own 10 par common stock for 11 a share. 18 Received the balance in full for the common stock subscription and issued the stock. 30 Sold 800 shares of its treasury stock for 11.50 a share. Oct. 15 Issued 3,000 shares of 40 par, 5% preferred stock in exchange for land with a fair market value of 125,000. 31 Sold 400 shares of its treasury stock for 10.75 a share. REQUIRED Prepare journal entries for these transactions.STOCKHOLDERS EQUITY SECTION After closing its books on December 31, 20--, Jackson Corporations stockholders equity accounts had the following balances: REQUIRED Prepare the stockholders equity section of the balance sheet for Jackson for the year ended December 31, 20--.1SEB 2SEB STOCK ISSUANCE (PAR, NO-PAR, AND STATED VALUE) The following independent stock transactions occurred during January 20-- for various corporations: (a) Issued 4,000 shares of 10 par common stock for 40,000 cash. (b) Issued 5,000 shares of 10 par common stock for 53,500 cash. (c) Issued 6,000 shares of no-par common stock for 60,000 cash. (d) Issued 4,000 shares of no-par common stock for 40,000 cash. (e) Issued 6,000 shares of no-par common stock with a stated value of 8 per share for 48,000 cash. (f) Issued 3,000 shares of no-par common stock with a stated value of 8 per share for 25,000 cash. Prepare general journal entries for these stock transactions, identifying each by letter.STOCK ISSUANCE (NONCASH ASSETS, SUBSCRIPTIONS, AND TREASURY STOCK) Brant Evans had the following stock transactions during the year: (a) Issued 6,000 shares of common stock with a 5 par value in exchange for real estate (land) with a fair market value of 33,500. (b) Issued 5,500 shares of common stock with a 5 par value and 7 fair market value in exchange for a building with an uncertain fair market value. (c) Received subscriptions for 11,000 shares of 5 par common stock for 58,000. (d) Received a payment of 29,000 on the stock subscription in transaction (c). (e) Received the balance in full for the stock subscription in transaction (c) and issued the stock. (f) Purchased 2,000 shares of its own 5 par common stock for 6 a share. (g) Sold 1,000 shares of the treasury stock in transaction (f) for 6.50 a share. (h) Sold 1,000 shares of the treasury stock in transaction (f) for 5.75 a share. Prepare general journal entries for these transactions, identifying each by letter.STOCKHOLDERS EQUITY SECTION After closing its books on December 31, Mel Brothers stockholders equity accounts have the following balances: Common stock subscriptions receivable 6,000 Common stock, 6 par, 15,000 shares 90,000 Preferred stock, 10 par, 8%, 10,000 shares 100,000 Common stock subscribed, 6 par, 5,000 shares 30,000 Retained earnings 50,000 Prepare the stockholders equity section of the balance sheet.PAR AND NO-PAR, COMMON AND PREFERRED STOCK Valdez Company had the following stock transactions during the first 5 years of operations: (a) Issued 24,000 shares of 1 par common stock for 26,000 cash. (b) Issued 18,000 shares of 1 par common stock for 18,000 cash. (c) Issued 3,000 shares of 10 par, 7% preferred stock for 30,000 cash. (d) Issued 4,500 shares of 10 par, 7% preferred stock for 46,500 cash. (e) Issued 1,800 shares of no-par common stock for 10,475 cash. (f) Issued 1,100 shares of no-par, 7 preferred stock for 32,000 cash. REQUIRED 1. Prepare general journal entries for these transactions, identifying each by letter. 2. Assume that stock transactions a, b, and c occurred in year 1. The amount available for dividends at the end of year 1 is 12,600. Prepare the dividend allocation between the preferred and common shares in total and per share for year 1.STATED VALUE, COMMON AND PREFERRED STOCK, AND NONCASH ASSETS Dans Hobby Stores had the following stock transactions during the year: (a) Issued 5,000 shares of no-par common stock with a stated value of 10 per share for 50,000 cash. (b) Issued 6,000 shares of no-par common stock with a stated value of 10 per share for 63,000 cash. (c) Issued 3,500 shares of no-par, 6% preferred stock with a stated value of 22 per share for 77,000 cash. (d) Issued 10,000 shares of 10 par common stock for land with a fair market value of 100,000. (e) Issued 11,000 shares of 10 par common stock with an 11 fair market value for a building with an uncertain fair market value. (f) Issued 8,000 shares of 30 par, 6% preferred stock for land with a fair market value of 243,000. REQUIRED Prepare general journal entries for these transactions, identifying each by letter.STOCK SUBSCRIPTIONS Athletics West had the following stock transactions during the year: (a) Received subscriptions for 100,000 shares of 1 par common stock for 118,000. (b) Received subscriptions for 5,000 shares of 18 par, 7% preferred stock for 92,000. (c) Received a payment of 59,000 on the common stock subscription. (d) Received a payment of 46,000 on the preferred stock subscription. (e) Issued 60,000 shares of 1 par common stock in exchange for a truck with a fair market value of 66,000. (f) Received the balance in full for the common stock subscription and issued the stock. (g) Received the balance in full for the preferred stock subscription and issued the stock. REQUIRED Prepare general journal entries for these transactions, identifying each by letter.STOCK SUBSCRIPTIONS AND TREASURY STOCK Rogers Hart formed a corporation and had the following organization costs and stock transactions during the year: June 30 Incurred the following costs of incorporation: July 15 Issued 8,000 shares of 10 par common stock for 82,000 cash. Aug. 1 Received subscriptions for 10,000 shares of 10 par common stock for 101,500. 15 Issued 10,000 shares of 10 par common stock in exchange for a building with a fair market value of 104,800. 31 Received a payment of 51,500 for the common stock subscription. Sept. 3 Purchased 1,000 shares of its own 10 par common stock for 11 a share. 18 Received the balance in full for the common stock subscription and issued the stock. 30 Sold 500 shares of its treasury stock for 11.70 a share. Oct. 15 Issued 4,000 shares of 25 par, 8 % preferred stock in exchange for land with a fair market value of 105,000. 31 Sold 500 shares of its treasury stock for 10.50 a share. REQUIRED Prepare journal entries for these transactions.STOCKHOLDERS EQUITY SECTION After closing its books on December 31, 20, Merrill Corporations stockholders equity accounts have the following balances: REQUIRED Prepare the stockholders equity section of the balance sheet for Merrill Corporation for the year ended December 31, 20--.1MYW 1EC Stockholders equity accounts and other related accounts of Gonzales Company as of January 1, 20--, the beginning of its fiscal year, are shown below. Preferred stock subscriptions receivable 50,000 Preferred stock, 10 par, 9% (200,000 shares authorized; 20,000 shares issued)200,000 Preferred stock subscribed (10,000 shares)100,000 Paid-in capital in excess of parpreferred stock40,000 Common stock, 10 par (100,000 shares authorized; 60,000 shares issued)600,000 Paid-in capital in excess of parcommon stock250,000 Retained earnings750,000 During 20--, Gonzales Company completed the following transactions affecting stockholders equity: (a) Received 20,000 for the balance due on subscriptions for 4,000 shares of preferred stock with a par value of 40,000 and issued the stock. (b) Purchased 10,000 shares of common treasury stock for 18 per share. (c) Received subscriptions for 10,000 shares of common stock at 19 per share, collecting down payments of 45,000. (d) Issued 15,000 shares of common stock in exchange for land with a fair market value of 290,000. (e) Sold 5,000 shares of common treasury stock for 100,000. (f) Issued 10,000 shares of preferred stock at 11.50 per share, receiving cash. (g) Sold 3,000 shares of common treasury stock for 17 per share. REQUIRED 1. Prepare general journal entries for the transactions, identifying each transaction by letter. 2. Post the journal entries to appropriate T accounts. The cash account has a beginning balance of 300,000. 3. Prepare the stockholders equity section of the balance sheet as of December 31, 20--. Net income for the year was 825,000 and dividends of 400,000 were paid.Prepare general journal entries for the following transactions, identifying each transaction by letter: (a) Gnu Company issued 5,000 shares of 1 par common stock to the Prendergas law firm as partial payment of fees incurred to incorporate the business. Gnu was short of cash, so Prendergas agreed to accept 10,000 cash and the shares of common stock in full settlement of its bill for 55,000. (b) Gnu issued 50,000 shares of 1 par common stock in exchange for a parcel of land for building a shopping plaza. (The list price for the land was 400,000; a similar parcel in the same area sold last week for 380,000. During the past month, the price at which Gnus common stock has traded on the open market has ranged from 5 to 12 per share. Two trades occurred yesterday at 7 and 10 per share.) (c) Gnu purchased 10,000 shares of 1 par value common treasury stock for 70,000. (This is the only treasury stock that Gnu holds.) (d) Gnu sold 4,000 shares of common treasury stock for 32,000. (e) Gnu sold 5,000 shares of common treasury stock for 30,000.Income taxes are a unique expense of the corporate form of business.2TF 3TF 4TF 5TF 1MC 2MC 3MC 4MC 5MC 1CE 2CE Teway Company declared and paid dividends in the current year as follows: (a) On May 31, declared cash dividend of 12,000 on common stock. (b) On June 20, paid the cash dividend declared in transaction (a). (c) On November 30, declared a 10% stock dividend on 50,000 shares of 2 par common stock with a market value of 7 per share. (d) On December 18, distributed the stock dividend declared in transaction (c). Prepare the journal entries for these transactions.4CE 5CE 1RQ 2RQ 3RQ 4RQ 5RQ 6RQ 7RQ 8RQ 9RQ 10RQ 11RQ CORPORATE INCOME TAX Stanton Company estimates that its 20-1 income tax will be 80,000. Based on this estimate, it will make four quarterly payments of 20,000 each on April 15, June 15, September 15, and December 15. 1. Prepare the journal entry for April 15. 2. Assume that all four quarterly payments have been entered in the general journal. On December 31, Stantons actual income tax amounts to 86,000. This amount will be paid by March 15, 20-2. Prepare the journal entry to record the additional income tax owed.CLOSING INCOME SUMMARY AND DIVIDENDS TO RETAINED EARNINGS Adriana Company had a net income of 130,000 and paid cash dividends of 26,000 for 20--. Overman Company had a net loss of 25,000 and distributed a 10% stock dividend with a market value of 15,000. 1. Prepare the journal entries for Adriana as of December 31, 20--, to close Income Summary and Cash Dividends into Retained Earnings. 2. Prepare the journal entries for Overman as of December 31, 20--, to close Income Summary and Stock Dividends into Retained Earnings.3SEA STOCK DIVIDENDS Kaufman Company currently has 200,000 shares of 1 par common stock outstanding. On March 15, a 10% stock dividend was declared to shareholders of record on April 2, distributable on April 14. Market value of the common stock was estimated at 5 per share. 1. Prepare journal entries for the declaration and distribution of the 10% common stock dividend. 2. Assume Kaufman Company declared a stock dividend of 30% rather than 10%. Prepare journal entries for the declaration and distribution of the 30% common stock dividend.STOCK SPLIT Goldstein Company has 100,000 shares of 10 par common stock outstanding. On July 1, the board of directors declared a two-for-one stock split. Prepare a memorandum entry in the general journal indicating the new par value and the total number of outstanding shares of common stock.6SEA STATEMENT OF RETAINED EARNINGS McGregor Company had the following balances and results for the current calendar year: Prepare a statement of retained earnings for the year ended December 31, 20--.8SPA 9SPA 10SPA 11SPA 1SEB CLOSING INCOME SUMMARY AND DIVIDENDS TO RETAINED EARNINGS Kennington Company had a net income of 90,000 and paid cash dividends of 18,000 for 20--. Mueller and Hanson Company had a net loss of 20,000 and distributed a 10% stock dividend with a market value of 15,000. 1. Prepare the journal entries for Kennington as of December 31, 20--, to close Income Summary and Cash Dividends into Retained Earnings. 2. Prepare the journal entries for Mueller and Hanson as of December 31, 20--, to close Income Summary and Stock Dividends into Retained Earnings.COMMON AND PREFERRED CASH DIVIDENDS Ramirez Company currently has 100,000 shares of 1 par common stock outstanding and 5,000 shares of 50 par preferred stock outstanding. On July 10, the board of directors declared a semiannual dividend of 0.30 per share on common stock to shareholders of record on August 1, payable on August 5. On July 15, the board of directors declared a semiannual dividend of 5 per share on preferred stock to shareholders of record on August 5, payable on August 10. Prepare journal entries for the declaration and payment of the common and preferred stock cash dividends.STOCK DIVIDENDS Martinez Company currently has 200,000 shares of 1 par common stock outstanding. On March 15, a 5% stock dividend was declared to shareholders of record on April 2, distributable on April 14. Market value of the common stock was estimated at 13 per share. 1. Prepare journal entries for the declaration and distribution of the 5% common stock dividend. 2. Assume Martinez Company declared a stock dividend of 30% rather than 5%. Prepare journal entries for the declaration and distribution of the 30% common stock dividend.5SEB 6SEB 7SEB 8SPB CASH DIVIDENDS, STOCK DIVIDEND, AND STOCK SPLIT During the year ended December 31, 20--, Baggio Company completed the following transactions: Apr. 15 Declared a semiannual dividend of 0.65 per share on preferred stock and 0.45 per share on common stock to shareholders of record on May 5, payable on May 10. Currently, 6,000 shares of 50 par preferred stock and 70,000 shares of 1 par common stock are outstanding. May 10 Paid the cash dividends. Oct. 15 Declared semiannual dividend of 0.65 per share on preferred stock and 0.45 per share on common stock to shareholders of record on November 5, payable on November 20. Nov. 20 Paid the cash dividends. 22 Declared a 10% stock dividend to shareholders of record on December 8, distributable on December 16. Market value of the common stock was estimated at 15 per share. Dec. 16 Issued certificates for common stock dividend. 20 Board of directors declared a two-for-one common stock split. REQUIRED Prepare journal entries for the transactions.10SPB 11SPB 1MYW 1EC MASTRY PROBLEM On January 1, 20--, Dover Companys retained earnings accounts had the following balances: During the year ended December 31, 20--, Dover completed the following selected transactions: Mar. 15 Declared a semiannual dividend of 0.30 per share on preferred stock and 0.40 per share on common stock to shareholders of record on April 5, payable on April 10. Currently, 5,000 shares of 10 par preferred stock and 30,000 shares of 2 par common stock are outstanding. Apr. 10 Paid the cash dividend. Sept. 15 Declared semiannual dividend of 0.30 per share on preferred stock and 0.40 per share on common stock to shareholders of record on October 5, payable on October 10. Oct. 10 Paid the cash dividend. Nov. 10 Board of directors declared a two-for-one common stock split. Dec. 31 Net income for 20-- was 135,000. Closed the income summary account. 31 Closed the cash dividends account. REQUIRED 1. Prepare journal entries for the transactions. 2. Post all entries affecting the appropriated and unappropriated retained earnings accounts to T accounts. 3. Prepare a statement of retained earnings for the year ended December 31, 20--.CHALLENGE PROBLEM This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter. LeeJin Corp. started a two-year period with 200,000 shares of 2 par common stock outstanding. During the two years, LeeJin had the following capital stock transactions: (a) Declared a 10% common stock dividend. The market value of the common stock was estimated at 8 per share. (b) Declared a cash dividend of 0.20 per share on common stock. (c) Declared a 30% common stock dividend. The market value of the common stock was estimated at 9 per share. (d) Declared a cash dividend of 0.20 per share on common stock. (e) Declared a two-for-one stock split. (f) Declared a cash dividend of 0.16 per share on common stock. REQUIRED 1. Prepare general journal entries for each of the transactions. Identify each transaction by the appropriate letter. (Assume that any cash or share distributions have been completed and are a matter of record before the next transaction occurs.) 2. Compute the following: (a) Number of shares of common stock outstanding after all the transactions have been completed. (b) The par value per share of LeeJins common stock after all the transactions have been completed.A secured bond is one that is backed by specific corporate assets.2TF When bonds are issued at face value, the debit to Cash and credit to Bonds Payable are for the same amount.4TF 5TF Bonds that give the holder the option of exchanging the bonds for capital stock in the corporation are called (a) debenture bonds. (b) serial bonds. (c) convertible bonds. (d) callable bonds.2MC 3MC 4MC Bond sinking fund earnings are (a) subtracted from the bond sinking fund. (b) added to the bond sinking fund. (c) subtracted from the current year interest expense. (d) added to the current year interest expense.1CE 2CE 3CE 4CE 5CE 1RQ 2RQ 3RQ 4RQ What accounts are affected when bonds are issued at face value?6RQ 7RQ 8RQ 9RQ When bonds are redeemed before maturity, how is the gain or loss on redemption determined? Why does the calculation differ for bonds issued at face value, at a premium, and at a discount?11RQ How should sinking fund earnings be reported on the corporation income statement?13RQ 1SEA 2SEA 3SEA REDEMPTION OF BONDS ISSUED AT FACE VALUE Levesque Lumber Co. issued 800,000 in bonds at face value 10 years ago and has paid semiannual interest payments through the years. (a) Assume the bonds are redeemed at face value. (b) Assume that 80,000 of the bonds are redeemed at 104. (c) Assume that 80,000 of the bonds are redeemed at 96. Prepare journal entries to record (a), (b), and (c).REDEMPTION OF BONDS ISSUED AT A PREMIUM Brighton Unlimited sold bonds at a premium for 630,000 (premium of 30,000) eight years ago. (a) The corporation redeems 60,000 of this issue at 98. The unamortized premium is 600. (b) The corporation redeems 90,000 of this issue at 102. The unamortized premium is 900. Prepare journal entries to record the redemption in (a) and (b).REDEMPTION OF BONDS ISSUED AT A DISCOUNT Mutschelknaus Manufacturing sold bonds at a discount for 290,000 (discount of 10,000) seven years ago. (a) The corporation redeems 25,000 of this issue at 97. The unamortized discount is 350. (b) The corporation redeems 30,000 of this issue at 99. The unamortized discount is 450. Prepare journal entries to record the redemption in (a) and (b).BOND SINKING FUNDS M. J. Adams Corporation pays 40,000 into a bond sinking fund each year for the future redemption of bonds. At the end of the first year, earnings on the sinking fund are 3,200. When the bonds mature, there is a balance in the sinking fund of 301,800, of which 300,000 is used to redeem the bonds. Prepare journal entries to record: (a) The initial sinking fund deposit. (b) The first years earnings. (c) The redemption of the bonds. (d) The return of excess cash to the corporation.BONDS ISSUED AT FACE VALUE Ito Co. issued the following bonds REQUIRED Prepare journal entries for: (a) Issuance of the bonds. (b) Interest payment on the bonds on September 30, 20-1. (c) Year-end adjustment on the bonds for 20-1. (d) Reversing entry for the beginning of 20-2. (e) Interest payments on the bonds for 20-2 (March 31 and September 30). (f) Redemption at maturity.9SPA 10SPA 11SPA 12SPA 13SPA 1SEB 2SEB 3SEB 4SEB 5SEB REDEMPTION OF BONDS ISSUED AT A DISCOUNT Medina Optical Supply sold bonds at a discount for 420,000 (discount of 20,000) eight years ago. (a) The corporation redeems 25,000 of this issue at 94. The unamortized discount is 250. (b) The corporation redeems 30,000 of this issue at 101. The unamortized discount is 300. Prepare journal entries to record the redemption in (a) and (b).7SEB BONDS ISSUED AT FACE VALUE Ramona Arroyo Co. issued the following bonds: REQUIRED Prepare journal entries for: (a) Issuance of the bonds. (b) Interest payment on the bonds on September 30, 20-1. (c) Year-end adjustment on the bonds for 20-1. (d) Reversing entry for the beginning of 20-2. (e) Interest payments on the bonds for 20-2 (March 31 and September 30). (f) Redemption at maturity.9SPB 10SPB 11SPB BONDS ISSUED AT A DISCOUNT, REDEEMED AT A GAIN Ellis Co. issued the following bonds at a discount: REQUIRED Prepare journal entries for: (a) Issuance of the bonds. (b) Interest payment and discount amortization on the bonds on September 30, 20-1. (c) Year-end adjustment on the bonds for 20-1. (d) Reversing entry for the beginning of 20-2. (e) Redemption of 50,000 of the bonds on April 1, 20-4, at 96.13SPB MANAGING YOUR WRITING The business where you work is considering issuing bonds to finance a major expansion. Your boss has just come from a lengthy meeting regarding the bonds, including the interest rate the bonds should carry. This has irritated your boss, who feels that the interest rate to use is obviousthe lowest one possible. This would yield the lowest interest expense to borrow the money. It seems stupid to pay big fees to financial advisors and lawyers when the question is so simple. Write a report to your boss explaining how the issue price of the bonds (the net amount borrowed) is affected by the stated interest rate on the bonds. Include an explanation of how interest costs consist of more than just periodic interest payments.1EC MASTERY PROBLEM Jackson, Inc.s fiscal year ends December 31. Selected transactions for the period 20-1 through 20-8 involving bonds payable issued by Jackson are as follows: 20-1 Oct. 31 Issued 600,000 of 10-year, 7%, callable bonds dated October 31, 20-1, for 612,000. Interest is payable semiannually on October 31 and April 30. The bond indenture provides that Jackson is to pay to the trustee bank 20,000 by May 15 of each year (except the tenth year) as a sinking fund for the retirement of the bonds on call or at maturity. Dec. 31 Made the adjusting entry for interest payable and amortized two months premium on the bonds (straight-line method). 20-2 Jan. 2 Reversed the adjusting entry for interest payable and bond premium amortization. Apr. 30 Paid the semiannual interest on the bonds and amortized six months premium. May 15 Paid the sinking fund trustee 20,000. Oct. 31 Paid the semiannual interest on the bonds and amortized six months premium. Dec. 31 Made the adjusting entry for interest payable and amortized two months premium on the bonds. 31 Sinking fund earnings for the year were 900. 20-8 May 15 Paid the sinking fund trustee 20,000. Oct. 31 Paid the semiannual interest on the bonds and amortized six months premium. 31 Redeemed the bonds, which were called at 97. The balance in the bond premium account is 3,600 after the payment of interest and amortization of premium have been entered. The cash balance in the sinking fund is 200,000, which is applied to the redemption. Jackson paid the sinking fund trustee the additional cash needed to pay off the bonds. (Hint: First make the entry for payment to the sinking fund, then make the entry for redemption of the bonds.) REQUIRED 1. Enter the preceding transactions in general journal form. 2. Calculate the carrying value of the bonds as of December 31, 20-2.CHALLENGE PROBLEM This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter. On April 1, 20-1, Rebound Co. issued 300,000 of 10%, 10-year bonds, callable at 105 after three years, at face value. On April 1, 20-4, after completing three years of interest payments on the bonds, Rebound is considering calling the bonds and issuing 300,000 of new 8%, 10-year bonds at face value. The current market interest rate is only 8%, so Rebound thinks it might save money by taking this action. REQUIRED 1. Compute the net savings to Rebound over the life of the original bond issue if it calls the old bonds and issues the new bonds. 2. Assuming Rebound calls the original bond issue, prepare the journal entry for the bond redemption.1SEA 2SPA 1SEB 2SPB True/False The purpose of the statement of cash flows is to provide information about total revenue and expenses.Investing activities are those transactions dealing with the exchange of cash between the company and its stockholders and creditors.An increase in accounts receivable is deducted from net income to compute cash from operating activities.4TF 5TF

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