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Study Resources (Accounting)

Multiple Choice—Computational 46.On July 5, 2017, Alpha Corp. purchased a call option for $2,400, giving it the right to buy 1,000 shares of Omega Corp. for $40 per share. On August 18, 2017, when the option value is $12,000, Omega settles the option for cash. The entry on Alpha’s books to.
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MULTIPLE CHOICE—Conceptual 1.The residual interest in a corporation belongs to the a) management. b) creditors. c) common shareholders. d) preferred shareholders. 2.Which statement is correct regarding real estate income or investment trusts? a) They are often set up as unlimited purpose trust funds. b) They are considered to be special purpose entities. c) The unitholders (investors) do not pay.
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21.Under IFRS, mandatorily redeemable preferred shares (term preferred shares) are treated as a) a liability. b) equity. c) a contra-asset. d) either a liability or a contra-asset. 22.Convertible bonds a) have priority over all other types of bonds. b) are usually secured by a first or second mortgage. c) pay interest only in the event earnings are sufficient.
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Pr. 14-79Bond interest and discount amortization On October 1, 2017, Irvine Corp. issued $400,000 8% bonds, due on October 1, 2022. Interest is to be paid semi-annually on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Irvine has a calendar year end. Instructions a)Complete the following.
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Ex. 15-127Share subscriptions On April 28, 2017, SwedenInc. accepted subscriptions for 10,000 of its no par value common shares. At this time, the shares were selling for $45 each.A 40% down payment was received with the remainder due in six months. On October 28, 2017the balance of the subscription price was.
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Pr. 14-82Entries for bonds payable Prepare journal entries to record the following transactions relating to long-term bonds of Lancaster Inc. Show calculations and round to the nearest dollar. a)On June 1, 2017, Lancaster Inc. issued $400,000, 6% bonds for $391,760, including accrued interest. The bonds were dated February 1, 2017, and interest.
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Pr. 15-150Dividend distribution You have recently been appointed CEO of Dumbledore Ltd., a wholesale distributor of magic supplies. One day your CFO reminds you that next week you will have to make recommendations to the board of directors regarding this year’s annual dividend. This catches you totally by surprise. Luckily, the.
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31.Which type of dividends do NOT reduce total shareholders' equity? a) cash dividends b) stock dividends c) property dividends d) liquidatingdividends 32.The declaration and issuance of a stock dividend larger than 25% generally a) increases common shares outstanding and increases total shareholders' equity. b) increases retained earnings and increases total shareholders' equity. c) may increase or decrease common.
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81.The shareholders' equity section of Zagreb Corp. at December 31, 2016 was: Common shares, no par value; authorized 20,000 shares; issued and outstanding 10,000 shares..................$50,000 Retained earnings......................................200,000 $250,000 On February 28, 2017, when the market value of Zagreb’s shares was $12 per share, the board of directors declared a 15% stock dividend, and accordingly.
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Exercises Ex. 15-125Lump sum issuance of shares BertramCorp. is authorized to issue 15,000 no par value common shares and 5,000 no par value preferred shares. On January 16, 2017, the corporation sold 50 common shares and 75 preferred shares for a lump sum of $18,000. The common were selling at $50 and.
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Pr. 14-81Entries for bonds payable Prepare the necessary journal entries to record the following transactions relating to the long-term issuance of bonds by Glendale Corp. Show calculations and round to the nearest dollar. March 1 Issued $200,000 (face value) 8% bonds for $218,040, including accrued interest. Interest is payable semi-annually on December 1.
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Ex. 16-82Convertible bonds Atlanta Ltd. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after the required interest was paid, all the bonds were converted into 3,000 no par value common shares, which were currently trading at $50 per share. Instructions How should Atlanta.
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MULTIPLE CHOICE—Conceptual 1.Derivative instruments a) require significant investments. b) transfer financial risks. c) transfer primary instruments. d) are settled at the date of issuance. 2.Derivatives exist to help companies a) hide financial irregularities. b) reduce interest expense. c) manage cash flows. d) manage risks. 3.Credit risk is the risk that a) an instrument’s price or value will change. b) the company itself will.
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Ex. 15-130Reacquisition of shares For numerous reasons, a corporation may reacquire its own shares. When a corporationdoes this, the CBCA requires that the purchased shares be cancelled. Instructions Explain how a corporation would account for each of the following: a)Purchase of shares at a price less than the carrying value of the shares b)Purchase of.
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66.On May 1, 2017, Durban should credit Contributed Surplus—Stock Warrants for a) $35,000. b) $20,000. c) $15,000. d) $ 0. 67.Lagos Inc. issued bonds with detachable warrants for $5,000,000 (par value). The bonds have a present value of $4,934,400. The fair value of the warrants is determined to be $220,000. Using the relative fair value.
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Pr. 15-154Capital disclosures Numerous disclosures are required under ASPE regarding capital.List five details that would normally be disclosed on the face of the statement of financial position, in the statement of changes in shareholders’ equity, or in the notes. *Pr. 15-155Treasury share transactions Algeria Corp. currently has 5,000 no par value common shares.
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Ex. 15-139Lump sum issuance of par value shares ChileCorp. issued 2,000 common shares and 400 preferred shares to an investor for $72,000 cash. Instructions a)Prepare the journal entry for the issuance, assuming the par value of the common shares was $5 and the market value was $30, and the par value of the.
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*Ex. 15-141Calculation of selected financial ratios Cuba Corp. provides the following information for 2017: Preferred shares, 8%, par value $100, cumulative, callable: Call price per share.................................$105 Shares outstanding.................................5,000 Dividends in arrears.................................none Common shares, no par value: Shares issued.....................................60,000 Dividends paid per share.............................$1.60 Market price per share...............................$36.00 Carrying value.....................................$800,000 Retained earnings (after closing)..........................$175,000 Treasury shares (common)...............................$125,000 Number of treasury shares held.......................5,000 Net income for 2017....................................$260,000 Instructions Calculate.
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Pr. 15-147Issuance of shares for cash, noncash consideration, and by subscription DahomeyCorp.is authorized to issue an unlimited number of no par common shares. Prepare the journal entries for the following transactions: 1.Sold 600,000 shares for $10 cash each, which was the fair market value of the shares. 2.Issued 80,000 shares and paid $140,000.
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56.Johannesburg Corp. has two issues of securities outstanding: no par value common shares and 8% convertible bonds with a par value of $8,000,000. Bond interest payment dates are June 30 and December 31. The conversion clause in the bond indenture entitles the bondholders to receive 40 common shares in exchange.
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Pr. 15-152Statement of Shareholders’ Equity Following is information provided by Timbuktu Inc. for their last two year ends: Balances at Dec 31, 2016 Balances at Dec 31, 2017 Common Shares, no par value $300,000 ?? Common shares sold during year $50,000 Accumulated Other Comprehensive Income 60,000 ?? Other Comprehensive Income for year (unrealized holding gain, after tax) 30,000 Retained Earnings 50,000 ?? Net income for year 110,000 Instructions In good.
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Ex. 15-137Dividends on preferred shares At December 31, 2017, Russia Inc. has outstanding the following shares: 5,000, $3.20, no par value preferred shares with a carrying value of $200,000, and40,000 no parvalue common shares with a carrying value of $600,000. No dividends have been paid since December 31, 2014. The corporation now desires.
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11.A put option is a right to a) force another party to buy the underlying security. b) repurchase a previously sold underlying security. c) sell the underlying security. d) buy the underlying security. 12.The intrinsic value of an option is the a) difference between the price of the underlying security and the strike price. b) value due.
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Pr. 15-149Share retirement and stock dividends Sudan Enterprises Inc. reported the following shareholder’s equity at December 31, 2016: Contributed Capital Preferred shares, $1, no par value, 100,000 shares authorized,cumulative, callable at $107 plus dividends in arrears; issued and outstanding, 20,000 shares...........................$2,040,000 Common shares, no par, 100,000 shares authorized, 80,000 issued and outstanding.................................640,000 Contributed surplus (retirement of common shares).....................120,000 Retained.
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Pr. 14-83Accounting for bond issuance and retirement Twilight Corp. desired to raise cash to fund its expansion by issuing long-term bonds. The corporation hired an investment banker to manage the issue (best efforts underwriting) and also hired the services of a lawyer, an audit firm, etc. On June 1, 2017, Twilight.
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PROBLEMS Pr. 16-89Forward contract Hudson Bay Builders Ltd. uses fir 2x6 lumber as its framing material. On November 15, 2017, Hudson Bay enters into a forward contract for 1,500,000 board feet of lumber at $0.25 per board foot for March 2018 delivery. At December 31, 2017, the market price for March delivery.
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*Pr. 16-93Hedging List the five steps used to analyze whether hedge accounting is necessary. *Pr. 16-94Interest rate swap On January 1, 2017, Montreal Ltd. issues a floating rate bond for $500,000. At the same time, the corporation enters into an interest rate swap whereby it agrees to pay interest on $500,000 at 10%.
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Pr. 14-84Bond accounting, ratios, debt covenants Superior Equipment Corporation is a public Canadian company manufacturing high-precision equipment. On January 1, 2014, Superior issued a 12%, $10,000,000 bond, maturing in ten years. At January 1, 2017, the bond had a carrying value of $9,300,000. Interest is payable semi-annually on June 30 and.
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Exercises Ex. 16-78Definition of derivative instruments Define and explain derivative instruments. Ex. 16-79Put options On November 15, 2017, Raleigh Inc. purchases a held-for-trading investment for $250,000. Raleigh also enters into a put option to sell the shares for $250,000. At December 31, 2017, the investment is valued at $255,000. Instructions Record any adjusting entries required at.
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Ex. 15-132Items affecting retained earnings What are the items that increase or decrease retained earnings? Ex. 15-133Stock dividends Describe the accounting treatment for the declaration of acommon stock dividend. Ex. 15-134Stock dividends and stock splits Indicate the principal effects of a stock dividend versus a stock split as they affect the issuing corporation. Respond in.
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11.Aye Corp. sells common shares on a subscription basis. The Common Shares account should be credited when the a) shares are subscribed for. b) first payment is made. c) last payment is made. d) last payment is made and the shares are issued. 12. Subscriptions Receivable are reported as a) a non-currentasset. b) a currentasset. c) a deduction.
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Ex. 15-135Dividends on preferred shares On December 31, 2017, the shareholders' equity of Finland Corporation shows the following: Preferred shares—$6, no par, 8,000 shares outstanding.......$ 400,000 Common shares—no par, 60,000 shares outstanding.........800,000 Retained earnings......................................240,000 Total shareholders' equity................................$1,440,000 Assumethat preferred dividends were last paid on December 31, 2015, and that all of the company's retained earnings are.
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111.If, instead of holding the 4,000 shares as treasury shares, Oslo had decided to cancel them, Oslo should debit a) Common Shares for $48,000 and Retained Earnings for $12,000. b) Contributed Surplus for $48,000 and Retained Earnings for $12,000. c) Contributed Surplus for $60,000. d) Common Shares for $60,000. *112.London Corporation has 50,000 no par.
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Pr. 14-85 Accounting for a troubled debt settlement Santa Ltd., who owes Claus Corp. $600,000 in notes payable, is in financial difficulty. To eliminate the debt, Claus agrees to accept from Santa land having a fair value of $455,000 and a recorded cost of $340,000. Instructions a)Calculate the amount of gain or loss.
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PROBLEMS Pr. 15-146Issuance of shares for cash, noncash consideration, and by subscription Presented below is information related to RhodesiaCorp.: 1.Rhodesia is granted a charter that authorizes issuance of 100,000 no par value preferred shares and an unlimited number of nopar value common shares. 2.10,000 common shares are issued for land with a fair value.
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Pr. 15-153 Shareholders’ Equity Section Mackenzie Corporation’s post-closing trial balance at December 31, 2017 was as follows: MACKENZIE LIMITED Post-Closing Trial Balance December 31, 2017 Dr. Cr. Buildings $2,175,000 Accounts receivable 720,000 Land 600,000 Inventories 540,000 FV-NI investments 300,000 Cash 285,000 Treasury shares (15,000 common shares) 255,000 Prepaid expenses 60,000 Contributed surplus - common $2,190,000 Preferred shares 750,000 Accounts payable 465,000.
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Ex. 16-81Convertible bonds On December 1, 2017, Boston Corp. issued $5,000,000 (par value), 12%, 5-year convertible bonds for $5,026,000 plus accrued interest. The bonds were dated April 1, 2017 with interest payable April 1 and October 1. If the bonds had NOT been convertible, they would have sold for $5,006,000. Bond.
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Pr. 15-151Equity transactions CongoCorp. has the following capital structure at the beginning of this year: Preferred shares, $3, no par value, cumulative, 20,000 shares authorized, 6,000 shares issued and outstanding..........................$300,000 Common shares, no par value, 60,000 shares authorized, 40,000 shares issued and outstanding.........................510,000 Total contributed capital........................................810,000 Retained earnings.............................................340,000 Total shareholders' equity.......................................$1,150,000 Instructions a)Record the following transactions which occurred.
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21.Which of the following transactions wouldNOT result in a decrease to retained earnings? a) declaration and issuance of a stock dividend b) incurrence of a net loss for the period c) reacquisition ofshares for less than the original issue price d) correctionof an error in which depreciation expense was understated in a prior period 22.Which.
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Ex. 16-84Stock options Prepare the necessary entries from January 1, 2017 to February 1, 2019 for the following events. If no entry is needed, write "No entry necessary." 1.On January 1, 2017, the shareholders of Musetta Inc. adopted a stock option plan for its top executives, where each could receive rights to.
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*Ex. 15-143Treasury shares ZambiaLtd.currently has 150,000 no par value common shares outstanding, with a carrying value of $3,900,000. Instructions Record the following transactions: a)Purchased 1,500 common shares at $29 per share, to be held as treasury shares b)Sold 800 treasury shares at $30 a share c)Retired the rest of the treasury shares *Ex. 15-144Financial reorganization The following shareholders’.
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Ex. 16-86Stock appreciation rights On January 1, 2017, Hay Ltd. established a share appreciation rights (SAR) plan for its executives. They could receive cash at any time during the next four years equal to the difference between the market price of the common shares and a pre-established price of $16 for.
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Pr. 16-91Convertible bonds and warrants For each of the unrelated situations described below, prepare the entries required to record the transactions. 1.On August 1, 2017, Alpha Corporation called its 10% convertible bonds for conversion. The $4,000,000 par value bonds were converted into 160,000 no par common shares. On August 1, there was.
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Multiple Choice—Computational 71.Berlin Corporation was organized on January 1, 2017, with 400,000 no par value common shares authorized. During 2017, the corporation had the following share transactions: Jan 5Issued 150,000 shares at $10 per share Apr 6Issued 50,000 shares at $12 per share Jun 8Issued 50,000 shares at $14 per share Jul 28Purchased 20,000 shares.
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91.Sarajevo Ltd. currently has outstanding 20,000 no par value common shares with a carrying value of $200,000, and 10,000 no par value, $0.60, cumulative, fully participating preferred shares with a carrying value of $100,000. Dividends on the preferred shares are one year in arrears. Assuming that Sarajevo wishes to distribute.
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