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Chapter 13: Q17-6Q (page 658)
Question: Explain how trading debt securities are accounted for and reported?
Answer:
Trading debt securities are reported on their fair value.
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Should a liability be recorded for risk of loss due to lack of insurance coverage? Discuss.
BE13-5 (L01) Dillons Corporation made credit sales of \(30,000 which are subject to 6% sales tax. The corporation also made cash sales which totalled \)20,670 including the 6% sales tax. (a) Prepare the entry to record Dillons鈥� credit sales. (b) Prepare the entry to record Dillons鈥� cash sales.
P17-2 (L01) (Available-for-Sale Debt Securities) On January 1, 2017, Novotna Company purchased \(400,000, 8% bonds of
Aguirre Co. for \)369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and
January 1. The bonds mature on January 1, 2022. Novotna Company uses the effective-interest method to amortize discount
or premiums. On January 1, 2019, Novotna Company sold the bonds for \(370,726 after receiving interest to meet its liquidity
needs.
Instructions
(a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available for-
sale.
(b) Prepare the amortization schedule for the bonds.
(c) Prepare the journal entries to record the semiannual interest on July 1, 2017, and December 31, 2017.
(d) If the fair value of Aguirre bonds is \)372,726 on December 31, 2018, prepare the necessary adjusting entry. (Assume the
On December 31, 2017, the fair value adjustment balance was a debit of $3,375.)
(e) Prepare the journal entry to record the sale of the bonds on January 1, 2019.
The payroll of Yellowcard Company for September 2016 is as follows. Total payroll was \(480,000, of which \)110,000 is exempt from Social Security tax because it represented amounts paid in excess of \(118,500 to certain employees. The amount paid to employees in excess of \)7,000 was \(400,000. Income taxes in the amount of \)80,000 were withheld, as was \(9,000 in union dues. The state unemployment tax is 3.5%, but Yellowcard Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee鈥檚 wages to \)118,500 and 1.45% in excess of \(118,500. No employee for Yellowcard makes more than \)125,000. The federal unemployment tax rate is 0.8% after state credit.
Instructions
Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately.
Question: Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.
Units Unit Cost Total Cost
April 1 inventory 250 \(10 \) 2,500
April 15 purchase 400 12 4,800
April 23 purchase 350 13 4,550
1,000 $11,850
Compute the April 30 inventory and the April cost of goods sold using the average-cost method.
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