A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank $80,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation? The […]

The selling price of a bond will be equal to the: future amount of the bond”s face value, calculated by using the market interest rate present value of all interest payments to be made over the bond”s remaining life, calculated by using the contractual interest rate. present value of the face value using the contractual interest rate for discounting plus the present value of all […]

Paws Inn is for sale. The following facts pertain: Book Value Fair Market Value Current assets $100,000 $170,000 Plant assets 400,000 700,000 Intangible assets 60,000 90,000 Liabilities 300,000 300,000 Cousin Vinnie Resorts purchases Paws Inn for $825,000. The value of goodwill amounts to: $30,000. $165,000. $300,000. $370,000.

Using the effective-interest method, the amount of bond discount to be amortized for a given period is calculated by: deducting the amount of cash interest for the period from the amount of interest expense for the period. adding the amount of cash interest for the period and the amount of interest expense for the period. deducting the amount of interest expense for the period from […]

This exercise tests your ability to distinguish between current and long-term liabilities. 1. Obligation to supplier for merchandise purchased on credit. (Terms 2/10, n/30). 2. Note payable to bank maturing 90 days after balance sheet date. 3. Note payable due January 1, 2017. 4. Property taxes payable. 5. Interest payable on note payable. 6. Sales taxes payable. 7. Portion of mortgage obligation due in years […]

This exercise will review the meaning of some important terminology related to the area of stockholders” equity. A corporation”s common stock may have a par value or it may be a no-par stock. A no-par stock may or may not have a stated value. The five different situations described below are examples of the various ways stockholders” equity may be structured: Zollo Corporation has 100,000 […]

This exercise will review the journal entries involved for an interest-bearing note payable. On November 1, 2014, Bono Company borrowed $80,000 from National Bank and signed a note stipulating that $80,000 was to be repaid in 6 months with interest at 12%. Bono Company adjusts its accounts and prepares financial statements annually on December 31 Instructions (a) Prepare the journal entry on November 1, 2014, […]

This exercise will point out the relationship between authorized, issued, outstanding, and subscribed shares. The following data are available regarding the common stock of the Daffy Corporation at December 31, 2014: Authorized shares 200,000 Unissued shares 60,000 Treasury shares 12,000 Instructions Compute the number of outstanding shares.

This exercise will illustrate the accounting for unearned revenue. Soap Opera Summarized is published by Viewer Publishers. Subscriptions to the magazine are sold for a one-year, two-year, or three-year period. Cash receipts from subscribers are credited to Unearned Subscription Revenue, and this account had a balance of $3,000,000 at December 31, 2014, before adjustment. Outstanding subscriptions at December 31, 2014, expire as follows: During 2015 […]

This exercise will illustrate how to record selected transactions related to the issuance of capital stock. On March 1, 2014, Aladdin Corporation received authorization to issue 400,000 shares of $10 par value common stock and 100,000 shares of $50 par value 6% preferred stock. The following transactions occurred during 2014: March 24 Issued 100,000 shares of common stock for cash at a price of $22 […]