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Question
A company lends $30,000 with 10% interest on May 1, 2015. This amount plus interest is due on April 30, 2016. Record the adjusting entry on December 31, 2015.
Answer
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Sandy Sensations purchases twenty, $1,000, 7%, 10-year bonds issued by Pizza Pier for $20,000 on January 1, 2015. The market interest rate for bonds of similar risk and maturity is 7%. Interest is received semiannually on June 30 and December 31.
1. Record the investment in bonds.
2. Record receipt of the first interest payment on June 30, 2015.
Q:
General Investment Co. (GIC) purchased bonds on January 1, 2015. GIC's accountant has projected the following amortization schedule from purchase until maturity: Date
Cash Paid
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Carrying Value 1/1/15 $194,758 6/30/15
$7,000
$7,790
$790
195,548 12/31/15
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889
198,114 6/30/17
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7,925
925
199,039 12/31/17
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7,961
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$200,000 Recording the bond purchase would have what effect on the financial statements?
a. Increase assets.
b. Increase liabilities.
c. Increase assets and liabilities.
d. No effect on total assets and total liabilities.
Q:
Consolidated financial statements are prepared when one company has:
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b. Accounted for the investment as available-for-sale securities.
c. Control over another company.
d. None of these is correct.
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a. Increase net income by $32,000.
b. Increase net income by $30,000.
c. Increase net income by $2,000.
d. No effect.
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When using the equity method to account for an investment, cash dividends received by the investor from the investee should be recorded:
a. As a reduction in the Investments account.
b. As an increase in the Investments account.
c. As dividend income.
d. As a contra item to stockholders' equity.
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Investments are reported at fair value when a company has a significant influence over another company in which it invests.
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Terms:
a. Annuity
b. Future value of a single amount
c. Discount rate
d. Future value of an annuity
e. Interest
f. Compound interest
g. Present value of a single amount
h. Time value of money
i. Simple interest
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Phrases:
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_____ A series of equal periodic payments.
_____ Accumulation of a series of equal payments.
_____ Interest earned on the initial investment and on previous interest.
_____ Accumulation of an amount with interest.
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Which three factors are necessary in calculating the present value of a single amount?
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2014 Total Assets
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$2,315 Total Liabilities
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1,525 Total Stockholders Equity
826
790 Income Statement Data Sales
$786 Interest Expense
77 Tax Expense
32 Net Income
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2. Return on assets ratio.
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4. Times interest earned ratio.
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Interest Expense [($30,000 - $554.55) x 6% x 1/12]
23 Notes Payable (difference)
557.32 Cash (monthly payment) 704.55 (to record the second monthly payment)
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Interest Expense ($30,000 x 6% x 1/12)
00 Notes Payable (difference)
554.55 Cash (monthly payment) 704.55 (to record the first monthly payment)
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1. Complete the first three rows of an amortization table through December 31, 2015.
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$2,579
$221
85,730 2
2,800
2,572
228
85,502 1. Record the bond issue.
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Companies are required by law to withhold federal and state income taxes from employees paychecks and remit these taxes to the government.
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