1.(9 points) On October 1, 2011 Haden Railroad Co. issued $800,000 of 10-year bonds paying a 9% interest rate with interest payable semiannually on April 1 and October 1. The discount rate for such...

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1. (9 points) On October 1, 2011 Haden Railroad Co. issued $800,000 of 10-year bonds
paying a 9% interest rate with interest payable semiannually on April 1 and October 1.
The discount rate for such securities is 8%. Haden uses the Straight Line amortization
method.
 Prepare the journal entry to record issuance of bond.
Cash 854,361
Premium on bonds payable 54,361
Bonds payable
800,000
 Prepare the journal entry to accrue the interest on March 30, 2012
Interest Expense 27,735
Premium on bonds payable (54,361/20 x 5/6) 2,265
Interest payable (800,000 x 9% x 5/6)
30,000
 Prepare the journal entry to pay the interest on April 1, 2012
interest expense 33,282
Premium on bonds payable (54,361/20) 2,718
interest payable (800,000 x 9%/2)
36,000
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2. (8 points) Equipment was acquired on January 1, 2009, at a cost of $190,000. The
equipment was originally estimated to have a salvage value of $10,000 and an estimated
life of 10 years. Depreciation has been recorded through December 31, 2011, using the
straight-line method. On January 1, 2012, the estimated salvage value was revised to
$16,000 and the useful life was revised to a total of 8 years.
Instructions
Determine the depreciation expense for 2012 and prepare the journal entry to record the
depreciation expense for the year of 2012.
Answer:
Annual depreciation in 2009 = (Cost – Salvage value)/Estimated life
= ($190,000 - $10,000)/10
= $18,000
Depreciation for years 2009 to 2011 = $18,000 x 3 = $54,000
Net Book value = Cost – Accumulated depreciation = $190,000 - $54,000 = $136,000
Annual depreciation in 2012 = (Cost – Salvage value)/Estimated life
= ($190,000 - $16,000)/8
= $21,750
Revised accumulated depreciation on Dec 31, 2011 = $65,250 - $54,000 = $11,250
Retained earnings 11,250
Depreciation expense 21,750
Accumulated depreciation
33,000
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3. (10 points)
The December 31, 2011, balance sheet of the Kramer Company had Accounts Receivable of
$650,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During 2012,
the following transactions occu
ed: sales on account $1,450,000; sales returns and allowances,
$100,000; collections from customers, $1,250,000; accounts written off, $35,000; previously
written off accounts of $8,000 were collected.
Instructions
(a) Journalize the 2012 transactions.
(b) If the company uses the percentage of receivables basis to estimate bad debt expense and
determines that uncollectible accounts are expected to be 6% of accounts receivable, what is
the adjusting entry at December 31, 2012?
a) Accounts Receivable 1,450,000
Sales 1,450,000
(To record sales on account)
Sales returns and allowances 100,000
Accounts Receivable 100,000
(To record sales returns and allowances)
Cash 1,250,000
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Accounts receivable 1,250,000
(Collection from customers)
Allowance for doubtful accounts 35,000
Accounts receivable 35,000
(Accounts written off)
Accounts receivable 8,000
Allowance for doubtful accounts 8,000
(Previously written off accounts were
collected)
Cash 8,000
Accounts Receivable 8,000
) Ending balance of accounts receivable = 650,000 + 1,450,000 - 100,000 - 1,250,000 - 35,000 +
8,000 - 8,000
= $715,000
Ending balance for Doubtful accounts = 33,000 - 35,000 + 8,000 = 6,000
Uncollectible estimated amount = $715,000 x 6% = $42,900
Amount of adjustment = Uncollectible estimated amount - Ending balance for Doubtful accounts
= $42,900 - $6,000
= $36,900
Bad debt expense 36,900
Allowance for doubtful accounts
36,900
(Adjustment of bad debt)
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4. (14 points) The cash balance per books for Wellmeyer Company on December 31, 2012, is
$8,736.01. (deposits in transit from last month $5484.38)(outstanding checks from last month:
No.14 $148.29) The following checks and receipts were recorded for the month of December
2012:
Checks Receipts
No. Amount No. Amount Amount Date
17 $372.96 22 $ 578.84 $ 843.86 12/5
18 780.62 23 1,687.50 941.54 12/21
19 157.00 24 921.30 808.58 12/27
20 587.50 25 246.03 967.00 12/31
21 234.15
In addition, the bank statement for the month of December is presented below:
Check No. 18...