Question: On July 1, 2013, Fontaine Company purchased

> If the bonds in question 8 are classified as available-for sale and they have a fair value at December 31, 2012, of $3,604,000, prepare the journal entry (if any) at December 31, 2012, to record this transaction. In question 8 On July 1, 2012, Wheeler C

> Under what conditions should a short-term obligation be excluded from current liabilities?

> The following situations relate to Bolivia Company. 1. Bolivia provides a warranty with all its products it sells. It estimates that it will sell 1,000,000 units of its product for the year ended December 31, 2012, and that its total revenue for the prod

> Sycamore Candy Company offers a CD single as a premium for every five candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each CD to the company is

> Allison Hardware Company’s payroll for November 2012 is summarized below. At this point in the year, some employees have already received wages in excess of those to which payroll taxes apply. Assume that the state unemployment tax is

> Mayaguez Corporation provides its officers with bonuses based on net income. For 2012, the bonuses total $350,000 and are paid on February 15, 2013. Prepare Mayaguez’s December 31, 2012, adjusting entry and the February 15, 2013, entry.

> Rockland Corporation earned net income of $300,000 in 2012 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 10% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rat

> Carow Corporation purchased, as a held-for-collection investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6%return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) The purchase of the i

> Kennedy Company has the following portfolio of available-for-sale securities at December 31, 2012. Instructions (a) What should be reported on Kennedy’s December 31, 2012, balance sheet relative to these long-term available-for-sale s

> Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?

> At December 31, 2012, the available-for-sale equity portfolio for Wenger, Inc. is as follows. On January 20, 2013, Wenger, Inc. sold security A for $15,300. The sale proceeds are net of brokerage fees. Instructions (a) Prepare the adjusting entry at D

> The following information relates to Starbucks for the year ended September 30, 2009: net income$390.8 million; unrealized holding gain of $9.8 million related to available-for-sale securities during the year;accumulated other comprehensive income of $48

> On July 1, 2012, Wheeler Company purchased $4,000,000 of Duggen Company’s 8% bonds, due on July 1, 2019. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for $3,500,000 to yield 10%. Determine the amount of interest reve

> Kasten Inc. provides paid vacations to its employees. At December 31, 2012, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is $500 per week. Prepare Kasten’s December 31, 2012, adjusting entry.

> To stimulate the sales of its Alladin breakfast cereal, Loptien Company places 1 coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2013, the company purchases 40,000 puppets at $1.50 each and sells 4

> The payroll of Delaney Company for September 2012 is as follows. Total payroll was $480,000, of which $140,000 is exempt from Social Security tax because it represented amounts paid in excess of $106,800 to certain employees. The amount paid to employees

> Presented below are two different situations related to Mckee Corporation debt obligations. Mckee’s next financial reporting date is December 31, 2012. The financial statements are authorized for issuance on March 1, 2013. 1. Mckee has a long-term obliga

> Player Corporation purchases equity securities costing $73,000 and classifies them as available-for-sale securities. At December 31, the fair value of the portfolio is $67,000. Instructions Prepare the adjusting entry to report the securities properly.

> Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2012. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-a

> Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2011. Early in 2012, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto’s

> What factors influence the dividend policy of a company?

> Kaymer Corporation issued 300 shares of $10 par value ordinary shares for $4,500. Prepare Kaymer’s journal entry.

> At what amount should trading, available-for-sale, and held-to-maturity securities be reported on the balance sheet?

> During the month of June, Danielle’s Boutique had cash sales of $265,000 and credit sales of $153,700, both of which include the 6% sales tax that must be remitted to the state by July 15. Instructions Prepare the adjusting entry that should be recorded

> The following two independent situations involve loss contingencies. Part 1 Benson Company sells two products, Grey and Yellow. Each carries a one-year warranty. 1. Product Grey—Product warranty costs, based on past experience, will normally be 1% of sal

> On December 31, 2012, Alexander Company had $1,200,000 of short-term debt in the form of notes payable due February 2, 2013. On January 21, 2013, the company issued 25,000 ordinary shares for $36 per share, receiving $900,000 proceeds after brokerage fee

> Alvarado Company sells a machine for $7,400 under a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the co

> Addison Manufacturing holds a large portfolio of debt and equity securities as an investment. The fair value of the portfolio is greater than its original cost, even though some securities have decreased in value. Sam Beresford, the financial vice presid

> On December 21, 2012, Zurich Company provided you with the following information regarding its trading securities. During 2013, Carolina Company stock was sold for $9,500. The fair value of the stock on December 31, 2013, was: Stargate Corp. stock&acir

> Indicate how unrealized holding gains and losses should be reported for investments classified as trading and held for-collection.

> Explain how trading securities are accounted for and reported.

> Douglas Corporation had 120,000 shares of stock outstanding on January 1, 2012. On May 1, 2012, Douglas issued 60,000 shares. On July 1, Douglas purchased 10,000 treasury shares, which were reissued on October 1. Compute Douglas’s weighted-average number

> Indicate how each of the following accounts should be classified in the stockholders’ equity section. (a) Common Stock (b) Retained Earnings (c) Paid-in Capital in Excess of Par—Common Stock (d) Treasury Stock (e) Paid-in Capital from Treasury Stock (f)

> How is present value related to the concept of a liability?

> Presented below is a note disclosure for Matsui Corporation. Litigation and Environmental: The Company has been notified, or is a named or a potentially responsible party in a number of governmental (federal, state and local) and private actions associat

> Dos Passos Company sells televisions at an average price of $900 and also offers to each customer a separate 3-year warranty contract for $90 that requires the company to perform periodic services and to replace defective parts. During 2012, the company

> Assume the facts in E13-5, except that Matthewson Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to a

> On July 1, 2012, Selig Company purchased for cash 40% of the outstanding capital stock of Spoor Corporation. Both Selig and Spoor have a December 31 year-end. Spoor Corporation, whose common stock is actively traded on the American Stock Exchange, paid a

> Consider the bond investment by Lady Gaga in IFRS17-5. Discuss the accounting for this investment if Lady Gaga’s business model is to hold the investment to collect interest while outstanding and to receive the principal at maturity. In IFRS17-5 Lady Ga

> McElroy Company has the following portfolio of investment securities at September 30, 2012, its last reporting date. On October 10, 2012, the Horton shares were sold at a price of $54 per share. In addition, 3,000 shares of Patriot common stock were ac

> The following information is available for Kinney Company at December 31, 2012, regarding its investments. Instructions (a) Prepare the adjusting entry (if any) for 2012, assuming the securities are classified as trading. (b) Prepare the adjusting entr

> Use the information from BE17-5 but assume the stock was purchased as a trading security. Prepare Fairbanks’s journal entries to record (a) The purchase of the investment, (b) The dividends received, and (c) The fair value adjustment. In BE17-5 Fairbank

> When should a debt security be classified as held-to- maturity?

> Satchel Inc. purchases 10,000 shares of its own previously issued $10 par common stock for $290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) Net income, (b) Total assets, (c) Tota

> Kalin Corporation had 2012 net income of $1,000,000. During 2012, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2012, Kalin had outstanding 250,000 shares of common stock. Compute Kalin’s 2012 earnings per share.

> Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2012, for $18 each. Prepare Sport Pro’s August 1, 2012, journal entry and the December 31, 2012, annual adjusting entry.

> On February 1, 2013, one of the huge storage tanks of Viking Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 20

> Brooks Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2012, the corporation sells for cash 400 computers at a unit price of $2,500. O

> Matthewson Company began operations on January 2, 2012. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of the year fo

> Parnevik Company has the following securities in its investment portfolio on December 31, 2012 (all securities were purchased in 2012): (1) 3,000 shares of Anderson Co. common stock which cost $58,500, (2) 10,000 shares of Munter Ltd. common stock which

> On January 1, 2012, Morgan Company acquires $300,000 of Nicklaus, Inc., 9% bonds at a price of $278,384. The interest is payable each December 31, and the bonds mature December 31, 2014. The investment will provide Morgan Company a 12% yield. The bonds a

> Lady Gaga Co. recently made an investment in the bonds issued by Chili Peppers Inc. Lady Gaga’s business model for this investment is to profit from trading in response to changes in market interest rates. How should this investment be classified by Lady

> For balance sheet purposes, can the fair value of a derivative in a loss position be netted against the fair value of a derivative in a gain position?

> List possible sources of additional paid-in capital.

> At December 31, 2012, Burr Corporation owes $500,000 on a note payable due February 15, 2013. (a) If Burr refinances the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much of the $50

> On January 1, 2012 (the date of grant), Lutz Corporation issues 2,000 shares of restricted stock to its executives. The fair value of these shares is $75,000, and their par value is $10,000. The stock is forfeited if the executives do not complete 3 year

> Andretti Inc. issued $10,000,000 of short-term commercial paper during the year 2012 to finance construction of a plant. At December 31, 2012, the corporation’s yearend, Andretti intends to refinance the commercial paper by issuing long-term debt. Howeve

> Under what conditions must an employer accrue a liability for employees’ compensation for future absences?

> Under what conditions should a provision be recorded?

> Below is a payroll sheet for Otis Import Company for the month of September 2012. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal

> On December 31, 2012, Santana Company has $7,000,000 of short-term debt in the form of notes payable to Golden State Bank due in 2013. On January 28, 2013, Santana enters into a refinancing agreement with Golden that will permit it to borrow up to 60% of

> A company proposes to include in its SEC registration statement a balance sheet showing its subordinate debt as a portion of stockholders’ equity. Will the SEC allow this? Why or why not?

> The Financial Accounting Standards Board issued accounting guidance to clarify accounting methods and procedures with respect to certain debt and all equity securities. An important part of the statement concerns the distinction between held-to-maturity,

> Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. Instructions (a) Indicate whether the bonds were purchased at a discount or at a prem

> Where in the financial statements is preferred stock normally reported?

> Assume the same information as in E17-3 except that the securities are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows. In E17-3 On January 1, 2011, Roosevelt Company purchased 12% bonds, havi

> Hendricks Corporation purchased trading investment bonds for $50,000 at par. At December 31, Hendricks received annual interest of $2,000, and the fair value of the bonds was $47,400. Prepare Hendricks’ journal entries for (a) The purchase of the investm

> Refer to the data for Barwood Corporation in BE16-6. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock. In BE16-6 On January 1, 2012, Barwood Corporation granted 5,000 options to executives. Each

> Which types of investments are valued at amortized cost? Explain the rationale for this accounting.

> When would an investor discontinue applying the equity method in an investment? Are there any exceptions to this rule?

> Takemoto Corporation borrowed $60,000 on November 1, 2012, by signing a $61,350, 3-month, zero-interest-bearing note. Prepare Takemoto’s November 1, 2012, entry; the December 31, 2012, annual adjusting entry; and the February 1, 2013, entry.

> An important consideration in evaluating current liabilities is a company’s operating cycle. The operating cycle is the average time required to go from cash to cash in generating revenue. To determine the length of the operating cycle,

> What are three examples of estimates that are used in accounting that are not contingencies? Can you explain why they are not considered contingencies?

> Cedarville Company pays its office employee payroll weekly. Below is a partial list of employees and their payroll data for August. Because August is their vacation period, vacation pay is also listed. Assume that the federal income tax withheld is 10%

> On December 31, 2012, Alexander Company had $1,200,000 of short-term debt in the form of notes payable due February 2, 2013. On January 21, 2013, the company issued 25,000 shares of its common stock for $36 per share, receiving $900,000 proceeds after br

> Dagwood Inc. recently noted that its 4% preferred stock and 4% participating preferred stock, which are both cumulative, have priority as to dividends up to 4% of their par value. Its participating preferred stock participates equally with the common sto

> Describe how a company would classify debt that includes covenants. What conditions must exist in order to depart from the normal rule?

> Dumars Corporation reports in the current liability section of its balance sheet at December 31, 2012 (its year-end), short-term obligations of $15,000,000, which includes the current portion of 12% long-term debt in the amount of $10,000,000 (matures in

> Define a provision, and give three examples of a provision.

> On January 1, 2012, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock

> Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Instructions (Round all computations to the nearest dollar.) (a) Prepare e

> On January 1, 2011, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2011, and mature January 1, 2016, with interest receivable Dece

> Describe the two criteria for determining the valuation of financial assets.

> What is the cost of a long-term investment in bonds?

> What guidance does the SEC give for disclosures regarding accounting policies used for derivatives?

> Upland Company borrowed $40,000 on November 1, 2012, by signing a $40,000, 9%, 3-month note. Prepare Upland’s November 1, 2012, entry; the December 31, 2012, annual adjusting entry; and the February 1, 2013, entry.

> At December 31, 2012, Reid Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2012. Net income for 2012 was $2,000,000, an

> Assume that your friend Will Morris, who is a music major, asks you to define and discuss the nature of a liability. Assist him by preparing a definition of a liability and by explaining to him what you believe are the elements or factors inherent in the

> Presented below is the current liabilities section and related note of Mohican Company Notes to Consolidated Financial Statements Note 1 (in part): Summary of Significant Accounting Policies and Related Data Accrued Warranty The company provides an acc

> Rodriguez Corporation includes the following items in its liabilities at December 31, 2012. 1. Notes payable, $25,000,000, due June 30, 2013. 2. Deposits from customers on equipment ordered by them from Rodriguez, $6,250,000. 3. Salaries payable, $3,750,

> What must an entity disclose about its asset retirement obligations?

> Devers Corporation issued $400,000 of 6% bonds on May 1, 2013. The bonds were dated January 1, 2013, and mature January 1, 2015, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Devers’s journ

> Listed below are selected transactions of Schultz Department Store for the current year ending December 31. 1. On December 5, the store received $500 from the Jackson Players as a deposit to be returned after certain furniture to be used in stage product

> The following are selected 2012 transactions of Darby Corporation. Sept. 1 Purchased inventory from Orion Company on account for $50,000. Darby records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $50,000, 12-month, 8% note to Or

> What guidance does the Codification provide on the disclosure of long-term obligations?

> What evidence is necessary to demonstrate the ability to defer settlement of short-term debt?

> Lexington Co. has the following available-for-sale securities outstanding on December 31, 2012 (its first year of operations). During 2013, Summerset Company stock was sold for $9,200, the difference between the $9,200 and the “fair v

> What features or rights may alter the character of preferred stock?

> On January 1, 2012, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2017. Novotna Company u

> On January 1, 2012, Jennings Company purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2012, and mature January 1, 2017, with interest receivable December 31 of each year. The bonds are classified in the held-to-ma