Question: On January 1, 2012, Durdil Co. borrowed

> If a company chooses to purchase its own shares and then either (1) Retires the repurchased shares and issues additional shares, or (2) Resells the repurchased shares, can a gain or loss be recognized by the company? Why or why not?

> At what percentage point can the issuance of additional shares still qualify as a stock dividend, as opposed to a stock split?

> Access the glossary (“Master Glossary”) to answer the following. (a) What is a “convertible security”? (b) What is a “stock dividend”? (c) What is a “stock split”? (d) What are “participation rights”?

> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem

> Recall from Chapter 13 that Hincapie Co. (a specialty bike-accessory manufacturer) is expecting growth in sales of some products targeted to the low-price market. Hincapie is contemplating a preference share issue to help finance this expansion in operat

> Weisberg Corporation has 10,000 shares of $100 par value, 6%, preference shares and 50,000 ordinary shares of $10 par value outstanding at December 31, 2012. Instructions Answer the questions in each of the following independent situations. (a) If the p

> Case 1 Kellogg Company Kellogg Company is the world’s leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below a

> Where can authoritative IFRS guidance related to stockholders’ equity be found?

> Why is a preemptive right important?

> What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?

> In this simulation, you are asked to address questions related to the accounting for stockholders, equity. Prepare responses to all parts. KWW Professional Simulation Stockholders Equity Time Remaining 4 hours 10 minutes Unspit Spit Hotz Spit Vertic

> Hincapie Co. (a specialty bike-accessory manufacturer) is expecting growth in sales of some products targeted to the low-price market. Hincapie is contemplating a preferred stock issue to help finance this expansion in operations. The company is leaning

> On January 1, 2012, Agassi Corporation had the following stockholders’ equity accounts. Common Stock ($10 par value, 60,000 shares issued and outstanding) ……….. $600,000 Paid-in Capital in Excess of Par …………………………………………………………………… 500,000 Retained Earning

> Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) Compute the debt to total assets ratio and the times interest earned ratio for these two companies

> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.

> Donald Lennon is the president, founder, and majority owner of Wichita Medical Corporation, an emerging medical technology products company. Wichita is in dire need of additional capital to keep operating and to bring several promising products to final

> Matt Ryan Corporation is interested in building its own soda can manufacturing plant adjacent to its existing plant in Partyville, Kansas. The objective would be to ensure a steady supply of cans at a stable price and to minimize transportation costs. Ho

> Part I. The appropriate method of amortizing a premium or discount on issuance of bonds is the effective-interest method. Instructions (a) What is the effective-interest method of amortization and how is it different from and similar to the straight-lin

> On March 1, 2013, Sealy Company sold its 5-year, $1,000 face value, 9% bonds dated March 1, 2013, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first interest payment date is September 1, 2013. Sealy uses

> On January 1, 2013, Nichols Company issued for $1,085,800 its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay interest semiannually on January 1 and July 1. Bond issue costs were not material in amount. Below are three presentations o

> Explain the difference between the proportional method and the incremental method of allocating the proceeds of lump-sum sales of capital stock.

> In the absence of restrictive provisions, what are the basic rights of stockholders of a corporation?

> Crocker Corp. owes D. Yaeger Corp. a 10-year, 10% note in the amount of $330,000 plus $33,000 of accrued interest. The note is due today, December 31, 2012. Because Crocker Corp. is in financial trouble, D. Yaeger Corp. agrees to forgive the accrued inte

> Martin Corporation is planning to issue 3,000 shares of its own $10 par value common stock for two acres of land to be used as a building site. Instructions (a) What general rule should be applied to determine the amount at which the land should be reco

> Wallace Computer Company is a small, closely held corporation. Eighty percent of the stock is held by Derek Wallace, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balanc

> Samantha Cordelia, an intermediate accounting student, is having difficulty amortizing bond premiums and discounts using the effective-interest method. Furthermore, she cannot understand why GAAP requires that this method be used instead of the straight-

> Presented below are four independent situations. (a) On March 1, 2013, Wilke Co. issued at 103 plus accrued interest $4,000,000, 9% bonds. The bonds are dated January 1, 2013, and pay interest semiannually on July 1 and January 1. In addition, Wilke Co.

> Sabonis Cosmetics Co. purchased machinery on December 31, 2011, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each December 31. An assumed interest of 8% is implicit in the purchase price. Instructions

> On December 31, 2012, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2016. Faital Company’s credit rating permits it to borrow funds from its several lines of cr

> On April 1, 2012, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2013, Seminole t

> Presented below are selected transactions on the books of Simonson Corporation. May 1, 2012 Bonds payable with a par value of $900,000, which are dated January 1, 2012, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (p

> Describe the accounting for the issuance for cash of no-par value common stock at a price in excess of the stated value of the common stock.

> In each of the following independent cases the company closes its books on December 31. 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2012. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2015. The bo

> McNabb Corp. had $100,000 of 7%, $20 par value preferred stock and 12,000 shares of $25 par value common stock outstanding throughout 2012. (a) Assuming that total dividends declared in 2012 were $64,000, and that the preferred stock is not cumulative bu

> Holiday Company issued its 9%, 25-year mortgage bonds in the principal amount of $3,000,000 on January 2, 1998, at a discount of $150,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The inden

> Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for the first year after purchase. It believes that this pro

> Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to complete the project. It therefore decides to issue $2,000,000

> The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2006, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial st

> Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31, 2012. Because Vargo Corp. is in financial trouble, First Trust agrees to extend the maturity date to December 31, 2014, reduce the principal to $220,000, and reduc

> Johnstone Inc. began operations in January 2011 and reported the following results for each of its 3 years of operations. 2011 …………………………….. $260,000 net loss 2012 ……………………………… $40,000 net loss 2013 ……………………….. $700,000 net income At December 31, 2013,

> Using the same information as in E14-22 and E14-24, answer the following questions related to American Bank (creditor). In E14-22 On December 31, 2012, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now exper

> Use the same information as in E14-22 above except that American Bank reduced the principal to $1,900,000 rather than $2,400,000. On January 1, 2016, Barkley pays $1,900,000 in cash to American Bank for the principal. In E14-22 On December 31, 2012, the

> What is meant by par value, and what is its significance to stockholders?

> Using the same information as in E14-22, answer the following questions related to American Bank (creditor). In E14-22 On December 31, 2012, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing fin

> On December 31, 2012, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,000,000 note receivable by the following modific

> Briefly explain why corporations issue convertible securities.

> Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2012, Strickland’s business deteriorated due to a faltering regional economy. On December 31, 2012, Moran State Bank agrees to

> At December 31, 2012, Redmond Company has outstanding three long-term debt issues. The first is a $2,000,000 note payable which matures June 30, 2015. The second is a $6,000,000 bond issue which matures September 30, 2016. The third is a $12,500,000 sink

> Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Fallen has elected to use the fair value opti

> Presented below are two independent situations: (a) On January 1, 2013, Spartan Inc. purchased land that had an assessed value of $390,000 at the time of purchase. A $600,000, zero-interest-bearing note due January 1, 2016, was given in exchange. There w

> On January 1, 2013, McLean Company makes the two following acquisitions. 1. Purchases land having a fair value of $300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $505,518. 2. Purchases equipment by issuing a 6%,

> Friedman Company had bonds outstanding with a maturity value of $500,000. On April 30, 2013, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, Friedman had issued other bonds a month earlier bear

> Explain each of the following terms: authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock.

> On June 30, 2004, Mendenhal Company issued 12% bonds with a par value of $600,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2012. Because of lower interest rates and a significant change in the company’s

> Robinson, Inc. had outstanding $5,000,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $7,000,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to c

> On January 2, 2007, Prebish Corporation issued $1,500,000 of 10% bonds at 97 due December 31, 2016. Legal and other costs of $24,000 were incurred in connection with the issue. Interest on the bonds is payable annually each December 31. The $24,000 issue

> What is meant by a dilutive security?

> Pawnee Inc. has issued three types of debt on January 1, 2012, the start of the company’s fiscal year. (a) $10 million, 10-year, 13% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%. (b) $25 million par of 10-year, zero-coupon

> On January 1, 2012, Osborn Company sold 12% bonds having a maturity value of $800,000 for $860,651.79, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2012, and mature January 1, 2017, with interest payable December 31 of

> On June 30, 2012, Mackes Company issued $5,000,000 face value of 13%, 20-year bonds at $5,376,150, a yield of 12%. Mackes uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 3

> Presented below are three independent situations. (a) Chinook Corporation incurred the following costs in connection with the issuance of bonds: (1) Printing and engraving costs, $15,000; (2) Legal fees, $49,000, and (3) Commissions paid to underwriter,

> Assume the same information as E14-6. In E14-6 Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable annually on January 1. Instruction

> Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable annually on January 1. Instructions Set up a schedule of interest expense and disc

> The financial statements of Marks and Spencer plc (M&S) are available at the books’ companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem

> Assume the same information as in E14-4, except that Foreman Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. In E14-4 Foreman Company issued $800,000 of 10%, 20-year bonds on

> Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2013, at 102. Interest is payable semiannually on July 1 and January 1. Foreman Company uses the straight-line method of amortization for bond premium or discount. Instructions Prepare

> Presented below are two independent situations. 1. On January 1, 2012, Divac Company issued $300,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2012, Verbitsky Company issued $20

> The following items are found in the financial statements. (a) Discount on bonds payable (b) Interest expense (credit balance) (c) Unamortized bond issue costs (d) Gain on redemption of bonds (e) Mortgage payable (payable in equal amounts over next 3 yea

> How is antidilution determined when multiple securities are involved?

> Presented below are various account balances. (a) Bank loans payable of a winery, due March 10, 2016. (The product requires aging for 5 years before sale.) (b) Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year.

> Shonen Knife Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 11% and has a carrying value of $16,000. At year-end, Shonen Knife’s borrowing rate has declined; the fair value o

> Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2013, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-yea

> McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January 1, 2013, and received a computer that normally sells for $31,495. The note requires annual interest payments each December 31. The market rate of interest for a note

> Samson Corporation issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2013, and received cash of $47,664. The implicit interest rate is 12%. Prepare Samson’s journal entries for (a) The January 1 issuance and (b) The Dece

> What are the advantages of using restricted stock to compensate employees?

> Coldwell, Inc. issued a $100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2013, and received $100,000 cash. The note requires annual interest payments each December 31. Prepare Coldwell’s journal entries to record (a) The issuanc

> On January 1, 2013, Henderson Corporation retired $500,000 of bonds at 99. At the time of retirement, the unamortized premium was $15,000 and unamortized bond issue costs were $5,250. Prepare the corporation’s journal entry to record the reacquisition of

> Wasserman Corporation issued 10-year bonds on January 1, 2013. Costs associated with the bond issuance were $160,000. Wasserman uses the straight-line method to amortize bond issue costs. Prepare the December 31, 2013, entry to record 2013 bond issue cos

> At December 31, 2013, Hyasaki Corporation has the following account balances: Bonds payable, due January 1, 2021 …………………… $2,000,000 Discount on bonds payable ……………………………………… 88,000 Interest payable ……………………………………………………… 80,000 Show how the above accoun

> Teton Corporation issued $600,000 of 7% bonds on November 1, 2013, for $644,636. The bonds were dated November 1, 2013, and mature in 10 years, with interest payable each May 1 and November 1. Teton uses the effective-interest method with an effective ra

> What are the types of situations that result in troubled debt?

> Assume the bonds in BE14-6 were issued for $644,636 and the effective-interest rate is 6%. Prepare the company’s journal entries for (a) The January 1 issuance, (b) The July 1 interest payment, and (c) The December 31 adjusting entry. In BE14-6 On Janua

> On January 1, 2013, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. JWS uses the effective-interest method. Prepare the company’s journal entries for (a) The Ja

> The Colson Company issued $300,000 of 10% bonds on January 1, 2013. The bonds are due January 1, 2018, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson’s journal entries for (a) The January issuance, (b)

> How are restrictions of retained earnings reported?

> A company plans to issue shares and wants to know the SEC’s stance on the accounting treatment for the costs of issuing stock. Can these costs be deferred, or must they be expensed immediately?

> (a) In a troubled-debt situation, why might the creditor grant concessions to the debtor? (b) What type of concessions might a creditor grant the debtor in a troubled-debt situation?

> What are the general rules for measuring gain or loss by both creditor and debtor in a troubled debt restructuring involving a settlement?

> What disclosures are required relative to long-term debt and sinking fund requirements?

> What is the “call” feature of a bond issue? How does the call feature affect the amortization of bond premium or discount?

> When is the stated interest rate of a debt instrument presumed to be fair?

> How should discount on bonds payable be reported on the financial statements? Premium on bonds payable?

> Explain how a non-consolidated subsidiary can be a form of off-balance-sheet financing.

> Assume the same information as in IFRS14-5, except that the bonds were issued at 84.95 to yield 12%. In IFRS14-5 Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2012, at 119.792 to yield 8%. Interest is payable semiannually on July 1

> What is done to record properly a transaction involving the issuance of a non-interest-bearing long-term note in exchange for property?

> Distinguish between the following interest rates for bonds payable: (a) Yield rate. (b) Nominal rate. (c) Stated rate. (d) Market rate. (e) Effective rate.

> Assume that Sarazan Company has a share-option plan for top management. Each share option represents the right to purchase a $1 par value ordinary share in the future at a price equal to the fair value of the shares at the date of the grant. Sarazan has

> What are the general rules for measuring and recognizing gain or loss by a debt extinguishment with modification?

> What is the required method of amortizing discount and premium on bonds payable? Explain the procedures.

> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem