Reference no: EM132451376

Questions -

Question 1 - In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.

For the declining-balance method, Farr Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 33,000. Actual hours of use in the first 3 years were: 2013, 840; 2014, 5,210; and 2015, 6,840.

Required -

1. Compute the amount of accumulated depreciation on each machine at December 31, 2015.

2. If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2013? In 2014?

Question 2 - Wempe Co. sold $3,360,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.

Required -

1. Prepare the journal entries to record the issuance of the bonds assuming they sold at: (1) 103 and (2) 95.

2. Prepare amortization tables for issuance of the bonds sold at 103 for the first three interest payments.

3. Prepare amortization tables for issuance of the bonds sold at 95 for the first three interest payments.

4. Prepare the journal entries to record interest expense for 2014 under both of the bond issuances assuming they sold at: (1) 103 and (2) 95.

5. Show the long-term liabilities balance sheet presentation for issuance of the bonds sold at 103 at December 31, 2014.

6. Show the long-term liabilities balance sheet presentation for issuance of the bonds sold at 95 at December 31, 2014.

Question 3 - Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $149,000 at an annual interest rate of 8%. The loan is repayable over 5 years in annual installments of $37,318, principal and interest, due each June 30. The first payment is due June 30, 2014. Grace uses the effective-interest method for amortizing debt. Her ski hill company's year-end will be June 30.

Required -

1. Prepare an amortization schedule for the 5 years, 2013-2018.

2. Prepare all journal entries for Grace Herron for the first 2 fiscal years ended June 30, 2014, and June 30, 2015.

3. Show the balance sheet presentation of the note payable as of June 30, 2015.

Question 4 - Ratzlaff Company issues €2 million, 10-year, 8% bonds at 97, with interest payable on July 1 and January 1.

Required -

1. Prepare the journal entry to record the sale of these bonds on January 1, 2014.

2. Assuming instead that the above bonds sold for 104, prepare the journal entry to record the sale of these bonds on January 1, 2014.