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Chapter 12: Q12-11BE (page 638)

Question: R. Wilson Corporation commenced operations in early 2017. The corporation incurred \(60,000 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation. Prepare journal entries to record the \)60,000 expenditure and 2017 amortization, if any.

Short Answer

Expert verified

Answer

Debited organization expense by $60,000 and credited cash account by the same amount

Step by step solution

01

Organization Expense

The first cost of forming a corporation is referred to as an organizational cost or charge. Legal and advertising fees to establish the corporation with the state and federal governments are common organizational charges.

02

Journal Entry

Date

Particulars

JF

Debit

Credit

Organization Expense

$60,000

Cash

$60,000

(Being organization expenses paid)

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Most popular questions from this chapter

On January 1, 2017, Dagwood Company purchased at par 6%

bonds having a maturity value of $300,000. They are dated January 1, 2017, and mature January 1, 2022, with interest received

on January 1 of each year. The bonds are classified in the held-to-maturity category.

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(a) Prepare the journal entry at the date of the bond purchase.

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Indicate how unrealized holding gains and losses should be reported for debt investments classified as trading, available-for-sale, and held-to-maturity.

(Investment Classifications)For the following investments, identify whether they are:

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3. Held-to-maturity debt securities.

4. None of the above.

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(a) A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases,

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planned 10 years from now.

Hillsborough Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of \(70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to \)60,000. It is determined that this loss in value is uncollectible. Prepare the journal entry, if any, to record the reduction in value.

On July 1, 2017, Wheeler Company purchased \(4,000,000 of Duggan Company鈥檚 8% bonds, due on July 1, 2024. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for \)3,500,000 to yield 10%. Determine the amount of interest revenue Wheeler should report on its income statement for the

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