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S-A E 211 Sarah Mongan is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Sarah is saying? S-A E  212(Ethics) Ton Janner, a 26-year-old entrepreneur, started Bells & Whistles (B&W), Inc., a firm that specializes in top-of-the-line add-ons for computer systems. The firm.
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92.On January 1, 2017, Dumas Industries acquired a 18% interest in Arlongton Corporation through the purchase of 12,000 shares of Arlongton Corporation common stock for $250,000. During 2017, Arlongton Corp. paid $60,000 in dividends and reported a net loss of $90,000. Dumas is able to exert significant influence on Arlongton..
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a Ex. 189 On December 31, 2017, Lipton, Inc. sold $3,000,000 (face value) of bonds. The bonds are dated December 31, 2017, pay interest annually on December 31, and will mature on December 31, 2020. The following schedule was prepared by the accountant for 2017.       AnnualInterest toInterestUnamortizedBond Interest Period  be Paid ExpenseAmortization  .
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Exercises Ex. 151 Maxim Corporation had the following transactions pertaining to debt investments. Jan. 1Purchased 80, 8%, $1,000 Woodrow Company bonds for $80,000. July 1Sold 20 Woodrow Company bonds for $21,500. Instructions Prepare journal entries for the purchase and sale of the Woodrow Company bonds. Ex. 152 Quagle Company had the following transactions pertaining to debt investments. 2017 Jan.   1Purchased.
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Ex. 154 The following transactions were made by Allen Company. Assume all investments are short-term and are readily marketable. June2Purchased 400 shares of Snoop Corporation common stock for $45 per share. July1Purchased 200 Barr Corporation bonds for $228,000. 30Received a cash dividend of $1.50 per share from Snoop Corporation. Sept.15Sold 120 shares of Snoop Corporation.
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BRIEF Exercises BE 141 On January 14, Balcom Corporation purchased 20, 11%, $1,000 Eiger Company bonds for $20,400. On November 30, the company sold 10 of the Eiger Company bonds for $11,600. Prepare journal entries for the purchase and sale of the Eiger Company bonds. BE 142 On January 2, Penny Company purchased 45,.
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Ex. 173 The following section is taken from Greene Corp’s balance sheet at December 31, 2016. Current liabilities Interest Payable..............................$  180,000 Long-term liabilities Bonds Payable, 9%, due January 1, 2021 ............. 2,000,000 Interest is payable annually on January 1. The bonds are callable on any interest date. Instructions (a)Journalize the payment of the bond interest on January 1,.
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Ex. 175 Stengle Company retired $500,000 face value, 9% bonds on June 30, 2017 at 96. The carrying value of the bonds at the redemption date was $508,000. Instructions Prepare the journal entry to record the redemption of the bonds. Ex. 176 Presented below are three independent situations: (a)Ball Corporation purchased $380,000 of its bonds on.
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BE 145 Jenner Company had the following transactions pertaining to its short-term stock investments. Jan.1Purchased 600 shares of Pork Company stock for $8,420. June1Received cash dividends of $0.60 per share on the Pork Company stock. Sept.15Sold 300 shares of the Pork Company stock for $3,400 Cash. Instructions Journalize the transactions. BE 146 On January 1, 2017, Mink Company.
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99.The adjusted trial balance for Otam Corp. at the end of the current year, 2017, contained the following accounts. 5-year Bonds Payable 8%$1,500,000 a.$1,945,000. b.$1,935,000. c.$2,095,000. d.$2,085,000. 100.The 2017 financial statements of Barker Co. contain the following selected data (in millions). a.64.3%. b.53.3%. c.28.6%. d.147.4%. 101.Which of the following statements concerning leases is true? a.Capital leases are favored by lessees. b.The appearance of.
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a Ex. 193 On January 1, 2017, Timber Corporation issued $800,000, 6%, 5-year bonds for $735,110. The bonds were sold to yield an effective-interest rate of 8%. Interest is paid annually on January 1. The company uses the effective-interest method of amortization. Instructions (a)Prepare a bond discount amortization schedule which shows the amortization.
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21.If the fair value of an available-for-sale security exceeds its cost, the security should be written up to fair value and a realized gain should be recognized. 22.The Fair Value Adjustment account can only have a credit balance or a zero balance. 23.To be classified as a short-term investment, the investment must.
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TRUE-FALSE STATEMENTS 1.Corporations purchase investments in debt or stock securities generally for one of two reasons. 2.A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income. 3.The accounting for short-term debt investments and for long-term debt investments is similar. 4.When debt investments, are sold, the.
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MATCHING 205.Match the items below by entering the appropriate code letter in the space provided.               A.BondsG.Straight-line method of amortization               B.Debenture bondsH.Operating lease               C.Bond indentureI.Debt to assets ratio               D.Premium on bonds payableJ.Capital lease               E.Discount on bonds payable               F.Effective-interest method of amortization _____              1.A contractual arrangement which is in effect a purchase of property. _____             .
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Ex. 182 Zohan Health is considering two alternatives for the financing of some high technology medical equipment. These two alternatives are: 1.Issue 60,000 shares of $10 par value common stock at $50 per share. 2.Issue $3,000,000, 8%, 10-year bonds at par. It is estimated that the company will earn $900,000 before interest and taxes.
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a119.Presented here is a partial amortization schedule for Graceland Company who sold $200,000, six year 10% bonds on January 1, 2016 for $212,000 and uses annual straight-line amortization. a.$10,000 b.$12,000 c.$2,000 d.$1,200 a120.Presented here is a partial amortization schedule for Graceland Company who sold $200,000, six year 10% bonds on January 1, 2016 for $212,000.
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Ex. 183 Three plans for financing a $20,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount and the income tax rate is estimated at 30%.      Plan 1       Plan 2       Plan 3   9% Bonds——$10,000,000 6% Preferred Stock, $100.
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Ex. 184 Presented below are three different aircraft lease transactions that occurred for Northwest Airways in 2017. All the leases start on January 1, 2017. In no case does Northern receive title to the aircraft during or at the end of the lease period; nor is there a bargain purchase option.                    Lessor                        Yale.
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Ex. 180 Loren Company is considering two alternatives to finance its purchase of a new $4,000,000 office building. (a)Issue 400,000 shares of common stock at $10 per share. (b)Issue 7%, 10-year bonds at par ($4,000,000). Income before interest and taxes is expected to be $3,500,000. The company has a 30% tax rate and has.
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132.An unrealized loss account on available-for-sale securities is a.reported under Other Expenses and Losses in the income statement. b.closed-out at the end of the accounting period. c.reported as a separate component of stockholders' equity. d.deducted from the cost of the investment. 133.Securities bought and held primarily for sale in the near term to generate income.
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52.Tempest Co. purchased 60, 6% Urich Company bonds for $60,000 cash. Interest is payable annually on January 1. If 30 of the securities are sold on January 1 for $32,000, the entry would include a credit to Gain on Sale of Debt Investments for a.$1,600. b.$1,750. c.$1,800. d.$2,000. 53.On January 1, Hamm Company purchased as.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  206 Bonds are frequently issued at amounts greater or less than face value. Describe how the market interest rate, relative to the contractual interest rate, affects the selling price of bonds. S-A E  207 When a bond sells at a discount, what is probably true about the market interest.
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102.Short-term stock investments should be valued on the balance sheet at a.the lower of cost or fair value. b.the higher of cost or fair value. c.cost. d.fair value. 103.In recognizing a decline in the fair value of short-term stock investments, an unrealized loss account is debited because a.management intends to realize this loss in the near.
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Ex. 157 Stewart Corporation's balance sheet at December 31, 2016, showed the following: Short-term investments, at fair value$46,500 Stewart Corporation's trading portfolio of stock investments consisted of the following at December 31, 2016:     Stock       Number of Shares    Cost  Conn Common Stock200$28,000 Ares Preferred Stock4006,000 Hall Common Stock300    9,000 $43,000 During 2017, the following transactions took place: Feb.5Sold 100 shares of.
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Ex. 153 Pincher Company purchased 50 Issac Company 12%, 10-year, $1,000 bonds on January 1, 2017, for $50,000. The bonds pay interest semiannually on January 1. On January 1, 2018, after receipt of interest, Pincher Company sold 30 of the bonds for $28,300. Instructions Prepare the journal entries to record the transactions described.
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a Ex. 190 On January 1, 2017, Sunset Corporation issued $4,000,000, 8%, 5-year bonds dated January 1, 2017, at 95. The bonds pay annual interest on January 1. The company uses the straight-line method of amortization and has a calendar year end. Instructions Prepare all the journal entries that Sunset Corporation would make.
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COMPLETION STATEMENTS               194.The terms of a bond issue are set forth in a formal legal document called a bond ________________.               195.Unsecured bonds that are issued against the general credit of the borrower are called ________________ bonds.               196.If bonds were issued at a premium, then the contractual interest rate was _____________.
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Ex. 158 On January 5, 2017, Grouse Company purchased the following stock securities as a long-term investment: 300 shares Bonter Corporation common stock for $4,500. 500 shares Wane Corporation common stock for $10,000. 800 shares Strauss Corporation common stock for $22,800. Assume that Grouse Company cannot exercise significant influence over the activities of the investee.
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149.When a company retires bonds before maturity, the gain or loss on redemption is the difference between the cash paid and the a.carrying value of the bonds. b.face value of the bonds. c.original selling price of the bonds. d.maturity value of the bonds. 150.Belle Corporation retires its bonds at 105 on January 1, following the.
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109.Which of the following is not a condition which would require the recording of a lease contract as a capital lease? a.The lease transfers ownership of the property to the lessee. b.The lease contains a bargain purchase option. c.The lease term is less than 75% of the economic life of the leased property. d.The.
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 MULTIPLE CHOICE QUESTIONS 32.Corporations invest excess cash for short periods of time in each of the following except a.equity securities. b.highly liquid securities. c.low-risk securities. d.government securities. 33.Corporations invest in other companies for all of the following reasons except to a.house excess cash until needed. b.generate earnings. c.meet strategic goals. d.increase trading of the other companies’ stock. 34.A typical investment to.
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112.The balance sheet presentation of an unrealized loss on an available-for-sale security is similar to the statement presentation of a.treasury stock. b.discount on bonds payable. c.allowance for doubtful accounts. d.prepaid expenses. 113.At the end of its first year, the trading securities portfolio consisted of the following common stocks. a.$2,000. b.$5,600. c.$2,100. d.$3,600. 114.At the end of its first year, the.
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a 139.Cotton Company issued $500,000 of 7%, 10-year bonds on one of its interest dates for $431,850 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. a.$30,229 b.$38,867 c.$45,000 d.$35,000 a 140.On January 1, Browne Inc. issued $5,000,000, 9% bonds for $4,685,000. The market rate of interest.
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BRIEF EXERCISES BE 160 King Company issued bonds with a face amount of $1,600,000 in 2012. As of January 1, 2017, the balance in Discount on Bonds Payable is $4,800.  At that time, King redeemed the bonds at 102. Instructions Assuming that no interest is payable, make the entry to record the redemption. BE 161 On.
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Ex. 186 On January 1, 2017, Muddle Inc. entered into an agreement to lease equipment from Albert Corporation. The lease agreement requires five annual rental payments of $90,000 beginning December 31, 2017. The present value of the rental payments is $342,117. The lease transfers substantially all the benefits and risks of.
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a 129.On January 1, 2017, $3,000,000, 5-year, 10% bonds, were issued for $2,916,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the amortization amount per year is a.$14,000. b.$8,400. c.$7,000. d.$16,800. a 130.A corporation issues $500,000, 8%, 5-year bonds on January 1,.
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62.Gayton Corporation purchased 1,000 shares of Smart common stock ($50 par) at $80 per share as a short-term investment. The shares were subsequently sold at $78 per share. The cost of the securities purchased and gain or loss on the sale were a.$50,000$2,000 gain b.$50,000$2,000 loss c.$80,000$2,000 gain d.$80,000$2,000 loss 63.In accounting for stock investments.
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82.If a company acquires a 40% common stock interest in another company, a.the equity method is usually applicable. b.all influence is classified as controlling. c.the cost method is usually applicable. d.the ability to exert significant influence over the activities of the investee does not exist. 83.If a common stock investment is sold at a gain,.
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89.Robin Corporation retires its $800,000 face value bonds at 104 on January 1, following the payment of annual interest.  The carrying value of the bonds at the redemption date is $829,960.  The entry to record the redemption will include a a.credit of $2,040 to Loss on Bond Redemption. b.debit of $2,040 to.
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EXERCISES Ex. 170 Malay Corporation issued $2 million, 10-year, 6% bonds on January 1, 2017. Instructions Prepare the entry to record the sale of these bonds, assuming they were issued at (a)98. (b)103. Ex. 171 On January 1, 2017, Gunne Corporation issued $800,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1. Gunne Corporation.
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a Ex. 192 Mystle Company issued $500,000, 8%, 10-year bonds on December 31, 2017, for $470,000. Interest is payable annually on December 31. Mystle uses the straight-line method of amortization and has a calendar year end. Instructions Prepare the appropriate journal entries on (a)December 31, 2017. (b)December 31, 2018.   .
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Ex. 159 Rosco Company purchased 35,000 shares of common stock of Paxton Corporation as a long-term investment for $900,000. During the year, Paxton Corporation reported net income of $300,000 and paid dividends of $100,000. Instructions (a)Assuming that the 35,000 shares represent a 10% interest in Paxton Corporation: 1.Prepare the journal entry to record the.
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Ex. 177 Kirk Company issued a $3,500,000, 10%, 10-year mortgage note payable to finance the construction of a building at December 31, 2017. The terms provide for annual installment payments of $569,609. Instructions Prepare the entry to record: (a)the mortgage loan on December 31, 2017. (b)the first installment payment. Ans: N/A, LO: 3, Bloom: AP, Difficulty:.
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BE 165 Proxy Inc. issues a $1,300,000, 10%, 10-year mortgage note on December 31, 2017, to obtain financing for a new building. The terms provide for annual installment payments of $211,569. Instructions Prepare the entry to record the mortgage loan on December 31, 2017, and the first installment payment on December 31, 2018. BE.
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122.Which one of the following would not be classified as a short-term investment? a.Marketable stock securities b.Equity method investments c.Marketable debt securities d.Short-term paper 123.Short-term investments are securities that are readily marketable and intended to be converted into cash within the next a.year. b.two years. c.year or operating cycle, whichever is shorter. d.year or operating cycle, whichever is longer. 124.Which.
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11.The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock. 12.Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted annually. 13.Under the equity method, the receipt of.
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Ex. 155 On April 1, Sign Company buys 4,000 shares of Polk common stock for $61,500. On October 1, Sign sells 1,000 shares of Polk stock for $20,500.. Instructions Prepare journal entries for the purchase and sale of the Polk common stock. Ex. 156 Hungh Company had the following transactions pertaining to short-term investments in.
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