Ch9 Liabilities HW A Warranty Backpack Co was organized to sell a single product that carries a 45day warranty against defects Engineering estimates indicate 3 of the units sold will prove defective require avg repair cost of 20 unit During Backpack s 1st month of operations total sales were 900 units by end of the month 10 defective units had been repaired Liability for product warranties at month end should be A 740 B 340 C 200 D 540 E None Unit Sales 900 x Defective 03 x Avg Repair Cost 20 Warranty Expense 540 Expense 540 Repairs made 10x20 200 Estimated Warranty Liability 340 HareCorp issued 6 5yr bonds payable w face amount 90000 when market interest rate was 6 Assume the acct yr of Hare ends on Dec31 bonds pay interest on Jan1 Jul1 Journalize following transactions for Hare include explanation entry Debits 1st then credits A Issuance of bonds payable at par on Jul1 14 B Accrual of interest expense on Dec31 14 rounded C Payment cash interest on Jan1 15 D Payment bonds payable maturity give date A Cash DEBIT 90k Bonds Payble CREDIT 90k to issue bonds par B Bond Principal 90k xInterest Rate 06 x Months 6 12 Interest expense 2700 Interest Expense DEBIT 2700 Interest Payble CREDIT 2700 toaccrue interest C Interest Payble DEBIT 2700 Cash CREDIT 2700 to pay semiannual intrst D Date Jul1 19 bc 5yr Bonds Payble DEBIT 90k Cash CREDIT 90k to pay bonds payble maturity SuperiorDriveInsLTD borrowed by issuing 5 000 000 of 8 bonds payable 96 5 on Jul1 14 Bonds are 10yr bonds pay interest Jan1 July1 1 How much cash did Superior receive when it issued bonds payable journal Par value 50k xIssue Price 96 5 4825000 Cash DEBIT 4825000 Discount Bonds Payble DEBIT 175000 Bonds Payble CREDIT 50000000 2 How much must Superior pay back maturity When is maturity date 50000000 Date 10yr bonds 10yr after issuance 3 How much cash interest will Superior pay each 6 months Par Value 5000000 xStated Interest Rate 08 xPortion of Year 6 12 Interest payment 200 000 4 How much interest expense will Superior report each 6mo Assume straight line amortization method Journalize entries for accrual of interest on Dec 31 14 payment of interest on Jan1 15 Discount 175000 of interest periods 20 Amortization of discount 8750 Interest Payment 200000 Amortization discount 8750 Interest Expense 208 750 Interest Expense DEBIT 208750 Discount on Bonds Payble CREDIT 8750 Interst Payble CREDIT 200000 Interest Payble DEBIT 200000 Cash CREDIT 200000 Liabilities Current Liablties Accts payble current portion bonds payble interst payble Total current liabilits LT liabilities NotespayblLT bonds paybl LESSdiscount bonds paybl Total liabilities Assume Orlando Sales Comp completed following note payble transactions Apr1 14 Purchased delivery truck 59000 by issuing 1yr 8 note payble Dec31 15 Accrued interst on note paybl Apr1 15 Paid note paybl maturity Requirmnt1 How much intrst expense must be accrued Dec31 14 round Note Paybl 59k xInterest 08 xMonths 12 9 12 Accrued Intrst 3540 Req2 Determine amount of Orlando Sales fial paymnt Apr1 15 Note Paybl 59k xInterest 08 xMonths 12 3 12 Interst Expense 1180 final paymnt apr1 15 63720 Req3 How much interest expense will Orlando Sales report 14 and 15 round interest expense 3540 14 and 1180 15 Bond w face amount 12k has current price quote 103 85 What s bond s price Face amount 12k x issue price 10 385 bond price 124620 Ch10 Stockholders Equity Stockholders equity for Salem Sport Inc CommonStock PreferStock PiC excess par common retained earn less treas stock total SE Aga ti Company authorized to issue 50k shares of 100 par common stock Apr30 14 Agati issued 35k shares at 115 share Agati s journal entry to record these facts should include a MC Sales price per share Par xShares issued PiC Calculate par common shares issued x par value share total par value This short exercise demonstrates similarity difference between 2 ways to acquire plan assests Compare balances in all accnts after making both sets of entries Are accnt balance similar or diff 1 Common shares issued x par value share total par value 2 Journal Cash DEBIT Common Stock shares issuedx parcomstock CREDIT PiC in excess par comm cash commstock CREDIT Journalze bldng equip for case A Building DEBIT Equip DEBIT Cash CREDIT Journlze case B Bldng DEBIT Equip DEBIT Common stock CREDIT PiC excess par com CREDIT Ch11 Amazing Stories INC reported following items Dec31 14 in thousands Data income statement Amazing Stories had 10k shares common stock outstanding 14 Amazing declared paid preferrd dividns 7080 durin 14 Report Amazing s EPS on income statement round 2 decimals places EPS from continuing operations using income statement Element of income Preferred dividend 31500 7080 Common shares outstanding 10k EPS 2 44 Calculate EPS for remaining elemnts of income Continuing Operations already done EPS 2 44 Loss on discont Operations Element of income preferred dividend 12600 0 Common shares outstanding 10k EPS 1 26 for loss negative Inc before extraordinary item Element income pre Dividend 18900 7080 10k 1 18 Extraord Gain net of tax 3500 0 10k 35 Net Income 22400 7080 10k 1 53 Ch12 Statement of Cash Flows Followin info pertains AZ Company Net cash provided by financing activites would be Proceeds from sale Left treas stock Paymnt LT debts Payment dividends Right netcashprov Ericsn Corp acctnts have assembld following data for yr end Jun30 14 Prep Eric Corp s statement of cash flows for yr end Jun30 14 Eric uses indirect method of op activts 1 Calculate net income Revenue Sales revenue Epenses CoGS Other op exp Depreciation ex Net Income cash flows op act Net Income CREDIT adjst Depreciation DEBIT Decrease current assets other than CREDIT Decrease currnt liabilities Credit Net cash cash flow invest Purchase equip Debit Proceeds sale land Credit Net Cash cash flows financing Proceeds issuanc comm stock DeBIT Paymnt note paybl Debit Paymnt dividnds Debit Purchase treas stock Debit Net cash Net increase decrease in cash Ch13 Financial Statement Analysis CoGS reported on common size income statement for 2014 CoGS14 NetRev14 Commonsize statement of CoGS Use EvanInc balance sht data presented 1 Compute EvanInc s quick acidtest ratio at Dec31 14 13 Cash STinvestment Net receiv Current liablties 2 Compare ratio values to other companies Higher better ability to pay current liabilities Buffalo Med Corp fin statmnt follow How many shares common stock did BuffaloMed have outstanding on average dur 14 EPS Net income preferrd dividnds sometimes 0