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31.The amortization of a premium on bonds payable decreases bond interest expense. 32.If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416. 33.If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is.
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51.If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the gain on redemption of bonds is $10,000. 52.Gains and losses on the redemption of bonds are reported as other income or other expense on the income statement. 53.Bonds may be purchased directly from the issuing corporation or through.
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123.During 2012, its first year of operations, Makala Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Oceanna Company 700 $29,000 Rockledge, Inc. 1,900 41,000 Assume that as of December 31, 2012, the Oceanna Company stock had a market value of $49 per share and Rockledge, Inc. stock had a market value of $20 per share. Makala had.
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95.The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be A.debit Bonds Payable, credit Cash B.debit Cash and Discount on Bonds Payable, credit Bonds Payable C.debit Cash, credit Premium on Bonds Payable and Bonds Payable D.debit Cash, credit Bonds Payable 96.When.
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108.On September 1, 2012, Parsons Company purchased $84,000, 10 year, 7% government bonds at 100 plus accrued interest. The semi-annual interest payment dates are June 30 and December 31. Interest calculations are done by the month. Required: (1) Journalize the entry to record the bond purchase. (2) Journalize the receipt of interest on December.
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1.Although marketable securities may be retained for several years, they continue to be classified as temporary, provided they are readily marketable and can be sold for cash at any time. 2.As with other assets, the cost of a bond investment includes all costs related to the purchase. 3.If the bonds are purchased.
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149.Sorenson Co., is considering the following alternative plans for financing their company: Plan I Plan II Issue 10% Bonds (at face) - $3,000,000 Issue $10 par Common Stock $4,000,000 $1,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income.
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103.Define (1) debt securities and (2) equity securities. Include their similarities and differences in your discussion. 104.On May 1, 2012, Chase Inc. purchases $60,000 of 10-year, 8% Manus Corporation bonds dated March 1, 2012 at 100 plus accrued interest. What entry would Chase record when purchasing the bonds? 105.On May 1, 2012,.
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101.Match each of the following investment terms with the appropriate definition below. 1.What occurs when a company purchases 50% or more of another company’s stock. Trading Securities 2.Debt and equity securities purchased and sold to earn short-term profits from changes in the market price. Equity Securities 3.When using this, dividends are treated as a reduction.
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125.Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the amount of gain or loss on redemption? A.$500 loss B.$15,500 loss C.$15,500 gain D.$500 gain 126.Bonds Payable has a balance of $1,000,000 and Premium on Bonds.
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175.On the first day of the current fiscal year, $1,000,000 of 10-year, 7% bonds, with interest payable semiannually, were sold for $1,050,000. Present entries to record the following transactions for the current fiscal year: (a) Issuance of the bonds. (b) First semiannual interest payment. (c) Amortization of bond premium for the year, using the straight-line.
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186.Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, 2011, with semiannual interest payments on September 1 and March 1. The bonds were issued on March 1, 2011, at 97. Glover’s year-end is December 31. a) Were the bonds issued at a premium, a discount, or at par? b) Was.
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105.A corporation issues $100,000, 10%, 5-year bonds on January 1, 2011, for $104,200. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is A.$10,420. B.$5,420. C.$5,000. D.$4,580. 106.If bonds.
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135.Discuss the appropriate financial treatment when an investor has a greater than 50% ownership in another company. 136.Discuss the similarities and differences in reporting trading securities, available-for-sale securities and held-to-maturity securities. 137.The cost and fair value of the trading securities held by AdBrand Company as of December 31, 2012 are as follows: Name Number.
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31.Available-for-sale securities are securities that management expects to sell in the future, but are not actively traded for profit. 32.Trading securities are reported on the balance sheet at cost. 33.Any difference between the fair market values of the securities and their cost is a realized gain or loss. 34.Unrealized gains and losses on.
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147.Match the following terms to the most appropriate answer: 1.the rate printed on the bond certificate amortization 2.the return required by the market on the day of issuance interest expense 3.the value reported on the income statement effective rate 4.if the contract rate exceeds the effective rate bond premium 5.the allocation of a premium or discount over the.
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11.An equity investment in less than 20% of another company’s stock is accounted for using the cost method. 12.Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method. 13.The investor carrying an investment by the equity method records cash dividends.
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178.Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with interest payable on June 30 and December 31. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 2007 July 1 Issued the bonds for cash at their face amount. Dec..
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76.Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives from Worton Corporation? A.debit Investment in Worton Corporation;.
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130.Journalize the entries to record the following selected transactions of Oliver Co.: (a) Purchased $100,000 of Kruse Co. 8% bonds at par value plus accrued interest of $2,000. (b) Received first semiannual interest payment. (c) Sold the bonds at 97 plus accrued interest of $1,500. 131.Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year,.
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164.Ulmer Company is considering the following alternative financing plans: Plan 1 Plan 2 Issue 8% bonds at face value $2,000,000 $1,000,000 Issue preferred stock, $15 par --- 1,500,000 Issue common stock, $10 par 2,000,000 1,500,000 Income tax is estimated at 35% of income. Dividends of $1 per share were declared and paid on the preferred stock. Required: Determine the earnings per share of.
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117.On March 1, 2011, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, 2011, Glory reports net income of $162,000. On January 15, 2012, Glory pays total dividends to stockholders of $33,000. Required: Journalize the three transactions described above. Date Accounts DR CR 118.On January 1, 2012, Valuation.
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56.Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be: A.Debit: Cash $105,000; Credit: Investment in Bonds $104,500 and Interest Revenue $500 B.Debit: Cash $105,000; Credit: Investment in.
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135.Balance sheet and income statement data indicate the following: Bonds payable, 6% (issued 2000, due 2020) $1,200,000 Preferred 8% stock, $100 par (no change during the year) 200,000 Common stock, $50 par (no change during the year) 1,000,000 Income before income tax for year 340,000 Income tax for year 80,000 Common dividends paid 60,000 Preferred dividends paid 16,000 Based on the data presented above, what.
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66.An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale? A.$12,750 gain B.$600 gain C.$600 loss D.$9,250 loss 67.Held to maturity securities A.are reported at fair market value B.include stocks as well as bonds C.may.
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75.When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at A.a premium B.their face value C.their maturity value D.a discount 76.A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be A.present value of 50.
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21.The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee. 22.When bonds held as long-term investments are purchased at a price other than the face value, the premium or discount should be amortized over the remaining life of the.
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168.Given the following data, prepare an amortization schedule (use the straight line method) 1/1/10 - issued $800,000, 9%, 3 year bonds, interest paid annually on 12/31 to yield 8% Use the following format (round to nearest dollar, may have small rounding difference); Date Cash paid Int. expense Amortization Bond carry value Date Cash.
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179.Journalize the following selected transactions completed during the current fiscal year: Jan. 3 The board of directors declared a stock split which reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 400,000. 22 Declared a dividend of $1.50 per share on the outstanding.
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85.A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? A.The amount of the annual interest expense.
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172.On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with interest payable semiannually, were sold for $1,225,000. Present entries to record the following transactions for the current fiscal year: (a) Issuance of the bonds. (b) First semiannual interest payment. (c) Amortization of bond discount for the year, using the straight-line.
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41.At 12/31/2009, the cash and securities held in a sinking fund to redeem bonds in 2011 are classified on the balance sheet as current assets. 42.If sinking fund cash is used to purchase investments, those investments are reported on the balance sheet as marketable securities. 43.Both callable and non-callable bonds can be.
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46.Temporary investments A.are reported as current assets B.include cash equivalents C.do not include equity securities D.all of the above 47.Which of the following is not a reason to invest excess cash in temporary investments? A.earn interest revenue B.influence the operations of another company C.receive dividends D.realize gains from the increase in market value of the securities 48.Investment is certificates of.
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162.On January 1, 2010, Yeargan Company obtained an $88,000, seven year 5% installment note from Farmers Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of $4,400 interest and principal repayment of $10,808. Requirement: (1) Journalize.
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86.If one company owns more than 50% of the common stock of another company A.a partnership exists. B.a parent–subsidiary relationship exists. C.the company whose stock is owned must be liquidated D.the cost method should be used to account for the investment. 87.Yankton Company began the year without an investment portfolio. During the year they purchased.
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181.At December 31st, the Jeter Company had the following ending balances; Retained Earnings - $100,000 Preferred Stock ($100 par, 7% cumulative, 10,000 authorized, 5,000 issued and outstanding) - 500,000 Treasury stock - $35,000 Additional paid in capital - common stock - 400,000 Additional paid in capital - preferred stock - 50,000 Common stock ($5.00 par value,.
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120.Skyline, Inc. purchased a portfolio of available-for-sale securities during 2012. The cost and fair value of this portfolio on December 31, 2012, was as follows: Name Number of Shares Total Cost Total Fair Value Blackstone, Inc. 400 $4,000 $5,200 Flagler Company 200 3,000 2,700 Patternson Corporation 600 7,500 9,800 Total $14,500 $17,700 Required: Provide the journal entry to record the adjustment of the available-for-sale security portfolio to fair value on.
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115.Sinking Fund Investments would be classified on the balance sheet as A.a current asset B.a fixed asset C.an investment D.a deferred debit 116.The cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as A.fixed assets B.current assets C.intangible assets D.investments 117.The bond indenture may provide.
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113.Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1, 2012. Marco reported net income of $80,000 and declared dividends of $20,000 during 2012. How much would Ramiro adjust their investment in Marco Company under the equity method? 114.Pepito Company purchased 40% of the outstanding stock of.
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65.One potential advantage of financing corporations through the use of bonds rather than common stock is A.the interest on bonds must be paid when due B.the corporation must pay the bonds at maturity C.the interest expense is deductible for tax purposes by the corporation D.a higher earnings per share is guaranteed for existing.
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1.A bond is simply a form of an interest bearing note. 2.Bondholders are creditors of the issuing corporation. 3.Bonds of major corporations are traded on bond exchanges. 4.Bondholders claims on the assets of the corporation rank ahead of stockholders. 5.A bond is usually divided into a number of individual bonds of $500 each. 6.A secured.
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133.Prepare the journal entries for the following transactions for Morgan Co. (a) Morgan Co. purchased 23,000 shares of the total of 100,000 outstanding shares of Gordon Corp. stock for $10 per share plus a $400 commission. (b) Gordon Corp.'s total earnings for the period are $80,000. (c) Gordon Corp. paid a total of $45,000 in cash.
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152.Use the following tables to calculate the present value of a $20,000 7%, 5 year bond that pays $1,400 ($20,000 ´ 7%) interest annually, if the market rate of interest is 7% Present Value of $1 at Compound Interest Periods 5% 6% 7% 10% 1 .95238 .94340 .93458 .90909 2 .90703 .89000 .87344 .82645 3 .86384 .83692 .81630 .75132 4 .82270 .79209 .76290 .68301 5 .78353 .74726 .71299 .62092 6 .74622 .70496 .66634 .56447 7 .71068 .66506 .62275 .51316 8 .67684 .62741 .58201 .46651 9 .64461 .59190 .54393 .42410 10 .61391 .55840 .50835 .38554 Present Value of Annuity of $1 at Compound Interest 153.On the first day of.
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181.Balance sheet and income statement data indicate the following: Company A Company B Bonds payable, 8% (issued 1995, due 2019) $1,200,000 $ 900,000 Preferred 5% stock, $100 par (no change during year) 300,000 400,000 Common stock, $50 par (no change during year) 1,000,000 1,000,000 Income before income tax for year 495,000 130,000 Income tax for year 75,000 12,000 Common dividends paid 50,000 0 Preferred dividends paid 21,000 28,000 (a) For each company, what is the.
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