Accounting 422 Questions.
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Presented below is a list of possible transactions. Analyze the effect of the 18 transactions on the financial statement categories indicated.
| Transactions | Assets | Liabilities | Owners’ Equity | Net Income | ||||||
| 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 item 2 above. | |||||||||
| 4. | Borrowed $100,000 from the bank by signing a 6-month, $112,000, zero-interest-bearing note. | |||||||||
| 5. | Recognized 4 months’ interest expense on the note from item 4 above. | |||||||||
| 6. | Recorded cash sales of $75,260, which includes 6% sales tax. | |||||||||
| 7. | Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld. | |||||||||
| 8. | Recorded employer’s payroll taxes. | |||||||||
| 9. | Accrued accumulated vacation pay. | |||||||||
| 10. | Recorded an asset retirement obligation. | |||||||||
| 11. | Recorded bonuses due to employees. | |||||||||
| 12. | Recorded a contingent loss on a lawsuit that the company will probably lose. | |||||||||
| 13. | Accrued warranty expense (assume expense warranty approach). | |||||||||
| 14. | Paid warranty costs that were accrued in item 13 above. | |||||||||
| 15. | Recorded sales of product and related service-type warranties. | |||||||||
| 16. | Paid warranty costs under contracts from item 15 above. | |||||||||
| 17. | Recognized warranty revenue (see item 15 above). | |||||||||
| 18. | Recorded estimated liability for premium claims outstanding. |
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Crane Company issued $432,000 of 10%, 20-year bonds on January 1, 2017, at 103. Interest is payable semiannually on July 1 and January 1. Crane Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| (a) | The issuance of the bonds. | |
| (b) | The payment of interest and the related amortization on July 1, 2017. | |
| (c) | The accrual of interest and the related amortization on December 31, 2017. |
| Date | Account Titles and Explanation | Debit | Credit |
| 1/1/17 | |||
| 7/1/17 | |||
| 12/31/17 | |||
Pronghorn Company sells 9% bonds having a maturity value of $1,550,000 for $1,382,384. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1. Set up a schedule of interest expense and discount amortization under the straight-line method. (Round answers to 0 decimal places, e.g. 38,548.)
| Schedule of Discount Amortization Straight-Line Method | ||||||||
| Year | Cash Paid | Interest Expense | Discount Amortized | Carrying Amount of Bonds | ||||
| Jan. 1, 2017 | $
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$
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$
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$
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| Jan. 1, 2018 | ||||||||
| Jan. 1, 2019 | ||||||||
| Jan. 1, 2020 | ||||||||
| Jan. 1, 2021 | ||||||||
| Jan. 1, 2022 |
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