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 […]

This exercise will compare and contrast the effects of debt financing with the effects of stock financing. The Siuda Specialty Corporation has the following items on its financial statements at December 31, 2014: Assets $1,000,000 Stockholders” equity $1,000,000 Number of common stock shares outstanding 60,000 Management is considering two alternatives to finance the acquisition of $500,000 of new assets: (1) Issuance of 50,000 shares of […]

This exercise will illustrate the journal entries required to record the issuance of bonds at face value and the entries to account for the related interest expense. The Hale Corporation issued bonds dated April 1, 2014. These bonds are 5-year term bonds with a face value of $1,000 each and a stated interest rate of 7%. Interest is payable semiannually on October 1 and April […]

This exercise will illustrate the journal entry required to record the issuance of bonds at a price other than par. The Russell Corporation issued 4,000 bonds dated May 1, 2014. These bonds are 10-year term bonds with a face value of $1,000 each and a stated interest rate of 8%. Interest is payable semiannually on November 1 and May 1. Instructions Prepare the journal entry […]

This exercise will illustrate how account balances involved in accounting for bonds payable are to be reported in the financial statements. When a company borrows money by issuing long-term debt instruments such as bonds, the entity is obligated to repay the principal plus interest on the outstanding debt. A balance sheet should properly reflect the amounts owed at the statement date. An income statement must […]

This exercise will illustrate how to account for (1) the redemption of bonds by cash payment prior to maturity, and (2) the conversion of bonds to stock. The balance sheet for Sea Willy Corporation reports the following information on June 30, 2014: Long -term liabilities 9% Convertible bonds payable $1,000.000 Less: Discount on bonds payable 50,000 $950,000 A semiannual interest payment was made and recorded […]

This exercise will illustrate the computations and journal entries for a bond when the effective-interest method of amortization is used. The Jan Larsen Corporation issued bonds with the following details: Face value $100,000.00 Contractual interest rate 7% Market interest rate 10% Maturity date January 1, 2017 Date of issuance January 1, 2014 Issuance price $92,539.95 Interest payments due Annually on January 1 Method of amortization […]

This exercise will illustrate the computations and journal entries made throughout a bond”s life when the straight-line method of amortization is used. Arnie Howell Corporation issued bonds with the following details: Face value $100,000.00 Contractual interest rate 7% Market interest rate 10% Maturity date January 1, 2017 Date of issuance January 1, 2014 Issuance price $92,539.95 Interest payments due Annually on January 1 Method of […]

Included in Jurassick Company”s liability accounts at December 31, 2014, was the following: 12% note payable issued in 2004 for cash and due in May 2015 $200,000 Sales taxes payable 16,000 Interest payable 11,000 Federal income tax withholdings 6,000 How much of the above should be included in the current liability section of Jurassick”s balance sheet at December 31, 2014? $27,000. $33,000. $227,000. $233,000.

The following information pertains to the Berry Bear Corporation at December 31, 2014 Balance per bank S20 000 Deposits in transit e 000 Outstanding checks 16.000 Bank service charges for December 400 Bank erroneously charged Berry Bears account for Sonny-Bear”s check written for $1,400. As of December 31, the bank had not corrected this error 1.400 Berry Bear”s cash balance per ledger (books) before adjustment […]