Question: Wasserman Corporation issued 10-year bonds on

> 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

> 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

> 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

> 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

> 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

> Wie Company has been operating for just 2 years, producing specialty golf equipment for women golfers. To date, the company has been able to fi nance its successful operations with investments from its principal owner, Michelle Wie, and cash flows from o

> 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

> 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

> On January 1, 2012, Durdil Co. borrowed and received $500,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years. As consideration for the zero-interest-bearing feature, Durdil agrees to supply the customer’s inventory needs f

> 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

> 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

> 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

> 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

> 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

> 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

> 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 and January 1. Instructions Prepare the journal entries to record the following. (a) The issuance of the bonds.

> 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

> 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

> 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

> In this simulation, you are asked to address questions related to the accounting for long-term liabilities. Prepare responses to all parts. KWW Professional Simulation Long-Term Liabilities Time Remaining 4 hours 30 minutes Unspit Spit Horiz Split V

> 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

> 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

> 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

> Assume the bonds in BE14-2 were issued at 103. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semiannually. In BE14-2 The Colson Company issued $300,000 of 10%

> Assume the bonds in BE14-2 were issued at 98. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semiannually. In BE14-2 The Colson Company issued $300,000 of 10%

> 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)

> Why is a preemptive right important?

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

> Wie Company has been operating for just 2 years, producing specialty golf equipment for women golfers. To date, the company has been able to finance its successful operations with investments from its principal owner, Michelle Wie, and cash flows from op

> 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

> How are restrictions of retained earnings reported?

> When must a company recognize an asset retirement obligation?

> Presented below is information related to Leland Inc. Instructions (a) Compute the following ratios or relationships of Leland Inc. Assume that the ending account balances are representative unless the information provided indicates differently. (1) C

> Vogue Company’s condensed financial statements provide the following information. Income Statement for the year ended 2012 Sales ……………

> Costner Company has been operating for several years, and on December 31, 2012, presented the following balance sheet. The net income for 2012 was $25,000. Assume that total assets are the same in 2011 and 2012. Instructions Compute each of the follow

> Presented below is a list of possible transactions. 1. Purchased inventory for $80,000 on account (assume perpetual system is used). 2. Issued an $80,000 note payable in payment on account (see item 1 above). 3. Recorded accrued interest on the note from

> Presented below are three independent situations. 1. Marquart Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Marquart’s past experience indicates that only 80% of the stamps

> Wynn Company offers a set of building blocks to customers who send in 3 UPC codes from Wynn cereal, along with 50¢. The block sets cost Wynn $1.10 each to purchase and 60¢ each to mail to customers. During 2012, Wynn sold 1,200,000 boxes of cereal. The c

> Bassinger Company purchases an oil tanker depot on January 1, 2012, at a cost of $600,000. Bassinger expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is es

> Leppard Corporation sells DVD players. The corporation also offers its customers a 2-year warranty contract. During 2012, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent $180,000 servicing warranties during 2012, and it estimate

> (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?

> Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2013. 1. Its line of amplifiers carries a 3-year warranty against defects. On the basis of past experience the estimated warranty costs

> What are compensated absences?

> Streep Factory provides a 2-year warranty with one of its products which was first sold in 2012. In that year, Streep spent $70,000 servicing warranty claims. At year-end, Streep estimates that an additional $400,000 will be spent in the future to servic

> You are the independent auditor engaged to audit Millay Corporation’s December 31, 2012, financial statements. Millay manufactures household appliances. During the course of your audit, you discovered the following contingent liabilities. 1. Millay began

> Presented below are three independent situations. Answer the question at the end of each situation. 1. During 2012, Maverick Inc. became involved in a tax dispute with the IRS. Maverick’s attorneys have indicated that they believe it is probable that Mav

> Moleski Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2012, Moleski Company purchased 8,800 premiums at 90 cents each and sold 120,000 boxes of soap powder at $3.30

> Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2013, at a cost of $10,000,000. Calaf is legally required to dismantle and remove the platform at the end of its useful life in 10 years. Calaf estimates it will cost

> 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

> Garison Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Garison uses two sales promotion techniques—warranties and premiums—to attract customers. Musical instruments and sound e

> Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend; an accumulated but undeclared dividend on cumulative preferred stock; a stock dividend distributable.

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

> Hincapie Co. manufactures specialty bike accessories. The company is most well known for its product quality, and it has offered one of the best warranties in the industry on its higher-priced products—a lifetime guarantee. The warranty on these products

> Polska Corporation, in preparation of its December 31, 2012, financial statements, is attempting to determine the proper accounting treatment for each of the following situations. 1. As a result of uninsured accidents during the year, personal injury sui

> Selzer Equipment Company sold 500 Rollomatics during 2012 at $6,000 each. During 2012, Selzer spent $30,000 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis. Instructions (a) Prepare 2012 ent

> Buchanan Company recently was sued by a competitor for patent infringement. Attorneys have determined that it is probable that Buchanan will lose the case and that a reasonable estimate of damages to be paid by Buchanan is $300,000. In light of this case

> Winslow Company sold 150 color laser copiers in 2012 for $4,000 apiece, together with a one-year warranty. Maintenance on each copier during the warranty period averages $300. Instructions (a) Prepare entries to record the sale of the copiers and the re

> Scorcese Inc. is involved in a lawsuit at December 31, 2012. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for $900,000 as a result of this suit. (b) Prepare the December 31 entry, if any, assuming it is not proba

> Kobayashi Corporation reports in the current liability section of its statement of financial position 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 $1

> On November 24, 2012, 26 passengers on Windsor Airlines Flight No. 901 were injured upon landing when the plane skidded off the runway. Personal injury suits for damages totaling $9,000,000 were filed on January 11, 2013, against the airline by 18 injure

> 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

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

> 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.

> 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.

> 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