Reference no: EM132981502

Questions -

Q1. Solvency Limited purchased equipment costing $150,000 on October 1, 2018, by paying 10% down payment in cash and signing an 8%, 9-month note payable for the balance amount. Interest and principle will be paid back together at the end of the note.

Prepare journal entries to record:

a. the purchase of the equipment,

b. the adjusting journal entry to record the accrued interest on December 31,

c. and the payment of the note at maturity along with the interest.

Q2. Silver corporation started its business in 2018. It sold electronics items for $154,500 in 2018. The company has provided a 2- year limited warranty for all sales. The company's estimate is that warranty costs for the first year will be 1% and will be 2% in the second year. Silver Corporation spent $1,100 on warranty repairs during 2018.

a. Prepare all journal entries related to the warranty for 2018.

b. How will the warranty liability be reported on the balance sheet on Dec 31, 2018?

Q3. On January 1, 2019, Jet Corp. issued $550,000 face value, 5-year bonds, with a coupon rate of 6%. Coupon is paid semi-annually on June 30 and December 31 each year.

Prepare the necessary journal entries to record the:

i) issuance of the bonds on Jan 1, 2019

ii) payment of first coupon payment on June 30, 2019.

Q4. a. $4000 of bond is quoted at 98.05. Are they selling at discount or premium. How much will you actually pay?

Q4. b. $4000 of bond is quoted at 102.50. Are they selling at discount or premium. How much will you actually pay?

Q5. Gold Corporation has been authorized to issue 200,000 common shares and 100,000, $2 preferred shares. At Jan 1, 2019, the company had the below in its shareholders equity:

20,000 common shares valued at $200,000

5,000 preferred shares valued at $80,000

Retained earnings was $45,000

On Dec 31 2019 the net profit was $25,000 and Gold Corp. issued no dividend during 2019.

In addition, during 2019 the company also issued:

10,000 common shares for $12 each and 2,000 preferred shares for $24 each. Moreover, the company issues 8,000 common shares for land valued at $125,000.

a. Prepare the journal entries for the share issues given above and

b. Prepare the shareholders equity part of the balance sheet in Dec 31, 2019.