PROBLEMS - Questions 1 – 8 1. On March 31, 2009, Hanson Corporation sold $7,000,000 of its 8%, 10-year bonds for $6,730,500 including accrued interest. The bonds were dated January 1, 2009. Interest...

Problem 1
PROBLEMS - Questions 1 – 8
1.
On March 31, 2009, Hanson Corporation sold $7,000,000 of its 8%, 10-year bonds for $6,730,500 including accrued interest. The bonds were dated January 1, 2009. Interest is paid semiannually on January 1 and July 1. On April 1, 2013, Hanson purchased 1/2 of the bonds on the open market at 99 plus accrued interest and canceled them. Hanson uses the straight-line method for amortization of bond premiums and discounts.
(a)
What was the amount of the gain or loss on retirement of the bonds?
(b)
Prepare the journal entry needed at April 1, 2013 to record retirement of the bonds. Assume that interest and premium or discount amortization have been recorded through January 1, 2013. Record interest and amortization on only the bonds retired.
(c)
Prepare the journal entry needed at July 1, 2013 to record interest and premium or discount amortization.
Solution
2.
On January 1 of the cu
ent year, Feller Corporation issued $3,000,000 of 10% debenture bonds on a basis to yield 9%, receiving $3,134,580. Interest is payable annually on December 31 and the bonds mature in 6 years. The effective-interest method is used.
(a)
What is the interest expense for the first year?
(b)
What is the interest expense for the second year?
3. Basic and Diluted Earnings Per Share
Assume that the following data relate to Rosen, Inc. for the year 2013:
Net income (30% tax rate)
$3,000,000
Average common shares outstanding 2013
1,000,000
shares
10% cumulative convertible prefe
ed stock:
Convertible into 80,000 shares of common
$1,600,000
8% convertible bonds; convertible into 75,000
shares of common
$2,500,000
Stock options:
Exercisable at the option price of $25 per share;
average market price in 2013, $30
84,000
shares
Instructions
Compute (a) basic earnings per share, and (b) diluted earnings per share.
4. Available-for-Sale Equity Investments
On January 2, 2012, Norwin Company purchased 1,000 shares of Oslo Company common stock for $30,000. The stock has a par value of $10 and is part of the total stock outstanding of 20,000 shares of Oslo Company. Norwin Company intends the stock to be available for sale. Total stockholders' equity of Oslo Company on January 2, 2012 was $600,000.
Instructions: Prepare necessary journal entries on the books of Norwin Company for the following transactions. If no entry is required, write "none" in the space provided. (Round all calculations to the nearest cent.)
(a)
January 2, 2012: Norwin purchases the shares described above.
(b)
December 31, 2012: Norwin receives a $.75 per share dividend from Oslo, and Oslo announces a net income for 2012 of $250,000.
(c)
December 31, 2012: According to The Wall Street Journal, Oslo common is selling for $27 per share. Norwin's management views this decline as being only temporary in nature. Oslo's common is Norwin's only available-for-sale security.
(d)
Fe
uary 15, 2013: Norwin sells 500 of the shares purchased on January 2, 2012 at $32 per share.
5. Trading Securities
The information below relates to Milton Company's trading securities in 2012 and 2013.
(a)
Prepare the journal entries for the following transactions.
January 1, 2012
Purchased $300,000 par value of GLF Company bonds at 97 plus accrued interest. The bonds pay interest annually at 9% each December 31. Broker's commission was $3,000.
September 1, 2012
Sold $150,000 par value of GLF Company bonds at 94 plus accrued interest. Broker's commission, taxes, and fees were $1,500.
September 5, 2012
Purchased 5,000 shares of Hayes, Inc. common stock for $30 per share. The
oker's commission on the purchase amounted to $2,000.
December 31, 2012
Make the appropriate entry for the GLF Company bonds.
December 31, 2012
The market prices of the trading securities at December 31 were: Hayes, Inc. common stock, $31 per share; and GLF Company bonds, 99. Make the appropriate entry.
July 1, 2013
Milton sold 1/2 of the Hayes, Inc. common stock at $32 per share. Broker's commissions, taxes, and fees were $1,000.
December 1, 2013
Milton purchased 600 shares of Ramirez, Inc. common stock at $45 per share. Broker's commission was $500.
December 31, 2013
Make the appropriate entry for the GLF Company bonds.
December 31, 2013
The market prices of the trading securities at December 31 were: Hayes, Inc. common stock, $34 per share; GLF Company bonds, 98; and Ramirez, Inc. common stock, $47 per share. Make the appropriate entry.
(b)
Present the financial statement disclosure (balance sheet and income statement) of Milton Company's transactions in trading securities for each of the years 2012 and 2013. Appropriate financial statement subheadings must be disclosed.
6. Segment Reporting.
Baden Company is a diversified company which has developed the following information about its five segments:
SEGMENTS
A
B
C
D
E
Total sales
$ 600,000
$1,700,000
$ 300,000
$ 320,000
$ 580,000
Operating profit (loss)
(270,000)
480,000
40,000
(300,000)
(10,000)
Identifiable assets
1,600,000
5,800,000
1,200,000
3,900,000
5,600,000
Instructions
Identify which segments are significant enough to wa
ant disclosure in accordance with FASB No. 131, "Reporting Disaggregated Information about a Business Enterprise," by applying the following quantitative tests:
a.
Revenue test
.
Operating profit or loss test
c.
Identifiable assets test
7. Long-Term Contracts.
Edwards Company contracted on 4/1/12 to construct a building for $2,300,000. The project was completed in 2014. Additional data follow:
2012
2013
2014
Costs incu
ed...