PA10-1 (Algo) Determining Financial Effects of Transactions Affecting Current Liabilities with Evaluation of Effects on the Debt-to-Assets Ratio [LO 10-2, LO 10-5]
Jack Hammer Company completed the following transactions. The annual accounting period ends December 31.
| April 30 | Received $780,000 from Commerce Bank after signing a 12-month, 9.00 percent, promissory note. |
| June 6 | Purchased merchandise on account at a cost of $90,000. (Assume a perpetual inventory system.) |
| July 15 | Paid for the June 6 purchase. |
| August 31 | Signed a contract to provide security service to a small apartment complex starting in September, and collected six months’ fees in advance, amounting to $31,500. |
| December 31 | Determined salary and wages of $55,000 were earned but not yet paid as of December 31 (ignore payroll taxes). |
| December 31 | Adjusted the accounts at year-end, relating to interest. |
| December 31 | Adjusted the accounts at year-end, relating to security service. |
Required:
- For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects on the accounting equation.
- For each item, indicate whether the debt-to-assets ratio is increased or decreased or there is no change. (Assume Jack Hammer’s debt-to-assets ratio is less than 1.0.)
| Date | Assets | = | Liabilities | + | Stockholders’ Equity | |||
| April 30 | = | + | ||||||
| June 6 | = | + | ||||||
| July 15 | = | + | ||||||
| August 31 | = | + | ||||||
| December 31 | = | + | ||||||
| December 31 | = | + | ||||||
| December 31 | = | + | ||||||
For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects on the accounting equation. (Do not round intermediate calculations. Round your answers to the nearest whole dollar. Enter any decreases to assets, liabilities, or stockholders equity with a minus sign. Enter your answers in transaction order provided in the problem statement.)
- Required 1
- Required
- Required 1
- Required 2
For each item, indicate whether the debt-to-assets ratio is increased or decreased or there
is no change. (Assume Jack Hammer’s debt-to-assets ratio is less than 1.0.) (Enter your answers in transaction order provided in the problem statement.)
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PA10-3 (Algo) Recording and Reporting Current Liabilities [LO 10-2]
Lakeview Company completed the following two transactions. The annual accounting period ends December 31.
- On December 31, calculated the payroll, which indicates gross earnings for wages ($112,000), payroll deductions for income tax ($11,200), payroll deductions for FICA ($8,400), payroll deductions for American Cancer Society ($4,200), employer contributions for FICA (matching), and state and federal unemployment taxes ($980). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded.
- Collected rent revenue of $6,600 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 11 to January 10 and was credited in full to Deferred Revenue.
Required:
- 1. & 2. Prepare the journal entries to record payroll on December 31, the collection of rent on December 10 and adjusting journal entry on December 31.
- 3. Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31.
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- Req 1 and 2
- Req 3
Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31. (Do not round intermediate calculations.)
| LAKEVIEW COMPANY | |
| Balance Sheet (partial) | |
| At December 31 | |
PA10-7 (Algo) (Supplement 10B) Recording Bond Issue, Interest Payments (Effective-Interest Amortization), and Early Bond Retirement [LO 10-S2]
On January 1, 2021, Surreal Manufacturing issued 700 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2023. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $680,577. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.
Required:
- 1. Prepare a bond amortization schedule.
- 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102.
Prepare a bond amortization schedule. (Round your answers to the nearest whole dollar. Make sure that the Carrying value equals face value of the bond in the last period. Interest expense in the last period will result in the amount in Discount Amortized equaling Discount on Bonds Payable.)
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prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102. (If no entry is required for a transaction/event, select “No Journal Entry Required” in the first account field. Round your answers to the nearest whole dollar amount.)
Journal entry worksheet
- Record the issuance of 700 bonds at face value of $1,000 each for $680,577.
Note: Enter debits before credits.
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PA10-8 (Algo) (Supplement 10C) Recording Bond Issue, Interest Payments (Simplified Effective-Interest Amortization), and Early Bond Retirement [LO 10-S3]
On January 1, 2021, Surreal Manufacturing issued 610 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2023. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $593,074. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.
Required:
- 1. Prepare a bond amortization schedule.
- 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102.
Complete this question by entering your answers in the tabs below.
- Req 1
- Req 2 to 5
Prepare a bond amortization schedule. (Do not round intermediate calculations. Round your answers to the nearest whole dollar. Make sure that the Carrying value equals to face value of the bond in the last period. Interest expense in the last period should be calculated as Cash Interest (+)/(-) Increase in Bonds Payable, Net.)
| Beginning of Year | Changes During the Period | End of Year | |||
| Period | Bonds Payable, Net | Interest Expense | Cash Paid | Increase in Bonds Payable, Net | Bonds Payable, Net |
| 01/01/21 – 12/31/21 | |||||
| 01/01/22 – 12/31/22 | |||||
| 01/01/23 – 12/31/23 | |||||
Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102. (Do not round intermediate calculations. If no entry is required for a transaction/event, select “No Journal Entry Required” in the first account field. Round your answers to the nearest whole dollar.)
Journal entry worksheet
- Record the issuance of 610 bonds at face value of $1,000 each for $593,074.
Note: Enter debits before credits.
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| January 01, 2021 | |||
Required information
PA11-1 (Algo) Analyzing Accounting Equation Effects, Recording Journal Entries, and Preparing a Partial Balance Sheet Involving Stock Issuance and Purchase Transactions [LO 11-2]
[The following information applies to the questions displayed below.]
Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $460,000 of net income and declared no dividends; the following selected transactions occurred in the order given:
- Issued 100,000 shares of the common stock at $61 cash per share.
- Reacquired 31,000 shares at $56 cash per share.
- Reissued 13,000 shares from treasury for $57 per share.
- Reissued 13,000 shares from treasury for $55 per share.
PA11-1 (Algo) Part 1
Required:
1. Indicate the account, amount, and direction of the effect on above transaction. (Enter any decreases to Assets, Liabilities and Stockholders’ Equity with a minus sign.)
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Required information
PA11-1 (Algo) Analyzing Accounting Equation Effects, Recording Journal Entries, and Preparing a Partial Balance Sheet Involving Stock Issuance and Purchase Transactions [LO 11-2]
[The following information applies to the questions displayed below.]
Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $460,000 of net income and declared no dividends; the following selected transactions occurred in the order given:
- Issued 100,000 shares of the common stock at $61 cash per share.
- Reacquired 31,000 shares at $56 cash per share.
- Reissued 13,000 shares from treasury for $57 per share.
- Reissued 13,000 shares from treasury for $55 per share.
PA11-1 (Algo) Part 2
2. Prepare journal entries to record each transaction. (If no entry is required for a transaction/event, select “No Journal Entry Required” in the first account field.)
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| January 01, 2021 | |||
Required information
PA11-1 (Algo) Analyzing Accounting Equation Effects, Recording Journal Entries, and Preparing a Partial Balance Sheet Involving Stock Issuance and Purchase Transactions [LO 11-2]
[The following information applies to the questions displayed below.]
Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $460,000 of net income and declared no dividends; the following selected transactions occurred in the order given:
- Issued 100,000 shares of the common stock at $61 cash per share.
- Reacquired 31,000 shares at $56 cash per share.
- Reissued 13,000 shares from treasury for $57 per share.
- Reissued 13,000 shares from treasury for $55 per share.
PA11-1 (Algo) Part 3
3. Prepare the stockholders’ equity section of the balance sheet at December 31. (Amounts to be deducted should be indicated by a minus sign.)
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PA11-3 (Algo) Finding Missing Amounts [LO 11-2, LO 11-3, LO 11-5]
At December 31, the records of Kozmetsky Corporation provided the following selected and incomplete data:
Common stock (par $2; no changes during the current year).
Shares authorized, 5,000,000.
Shares issued, ? ; issue price $9 per share.
Shares held as treasury stock, 11,600 shares, cost $7 per share.
Net income for the current year, $410,720.
Common Stock account, $144,000.
Dividends declared and paid during the current year, $2 per share.
Retained Earnings balance, beginning of year, $740,000.
Required:
Complete the following: (Round “Earnings per share” to 2 decimal places.)
| 1-a. Shares issued | |
| 1-b. Shares outstanding | |
| 2. The balance in Additional Paid-in Capital would be | |
| 3. Earnings per share is | |
| 4. Total dividends paid on common stock during the current year is | |
| 5. Treasury stock should be reported in the stockholders’ equity section of the balance sheet in the amount of | |
| 6. Assume that the board of directors voted a 2-for-1 stock split. After the stock split, the par value per share will be |
PA11-4 (Algo) Calculating Common and Preferred Cash Dividends [LO 11-2, LO 11-3, LO 11-4]
Ritz Company had the following stock outstanding and Retained Earnings at December 31, 2021:
| Common stock (par $1; issued and outstanding, 490,000 shares) | $ 490,000 |
| Preferred stock, 7% (par $10; issued and outstanding, 20,900 shares) | 209,000 |
| Retained Earnings | 899,000 |
On December 31, 2021, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2019 or 2020. Three independent cases are assumed:
| Case A: | The preferred stock is noncumulative; the total amount of 2021 dividends would be $29,000. |
| Case B: | The preferred stock is cumulative; the total amount of 2021 dividends would be $29,000. Dividends were not in arrears prior to 2019. |
| Case C: | Same as Case B, except the amount is $74,000. |
Required:
- 1-a. Compute the amount of dividends in total payable to each class of stockholders if dividends were declared as described in each case.
- 1-b. Compute the amount of dividends per share payable to each class of stockholders if dividends were declared as described in each case.
| Case A | Case B | Case C | |
| Preferred | |||
| Common | |||
| Total |
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- Req
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