EXAMINATION CARD № 1

on the discipline “Financial Accounting II”

for the 3rd year students

1. Why are holding gains and losses treated differently for trading securities and securities available-for-sale?

http://simplestudies.com/accounting-for-short-term-investments.html/page/4

2. Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently.

s of $8,000 on each June 30 beginning June 30, 2014. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment?

Johnstone needs to accumulate sufficient funds to pay a $400,000 debt that comes due on December 31, 2018. The company will accumulate the funds by making five equal annual deposits to an account paying 6% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2013.

.Johnstone Company is facing several decisions regarding investing and financing activities.Address each decision independently.1.On June 30, 2011, the Johnstone Company purchased equipment from Genovese Corp.Johnstone agreed to pay Genovese $10,000 on the purchase date and the balance in fiveannual installments of $8,000 on each June 30 beginning June 30, 2012.Assuming that aninterest rate of 10% properly reflects the time value of money in this situation, at whatamount should Johnstone value the equipment?$10,000 + PV(FV=0 PMT=8,000 N=5 i=10%) = $40,3262.Johnstone needs to accumulate sufficient funds to pay a $400,000 debt that comes due onDecember 31, 2016.The company will accumulate the funds by making five equal annualdeposits to an account paying 6% interest compounded annually.Determine the requiredannual deposit if the first deposit is made on December 31, 2011.PMT Beg(PV=0 FV=400,000 N=5 i=6%) = $66,9423.On January 1, 2011, Johnstone leased an office building.Terms of the lease requireJohnstone to make 20 annual lease payments of $120,000 beginning on January 1, 2011.A10% interest rate is implicit in the lease agreement.

3. Camden Biotechnology began operations in September 2013. The following selected transactions relate to liabilities of the company for September 2013 through March 2014. Camden’s fiscal year ends on December 31. Its financial statements are issued in April.

a. On September 5, opened checking accounts at Second Commercial Bank and negotiated a short-term line of credit of up to $15,000,000 at the bank’s prime rate (10.5% at the time). The company will pay no commitment fees.

b. On October 1, borrowed $12 million cash from Second Commercial Bank under the line of credit and issued a five-month promissory note. Interest at the prime rate of 10% was payable at maturity. Management planned to issue 10-year bonds in February to repay the note.

c. Received $2,600 of refundable deposits in December for reusable containers used to transport and store chemical-based products.

d. For the September–December period, sales on account totaled $4,100,000. The state sales tax rate is 3% and the local sales tax rate is 3%. (This is a summary journal entry for the many individual sales transactions for the period.)

e. Recorded the adjusting entry for accrued interest.

f. In February, issued $10 million of 10-year bonds at face value and paid the bank loan on the March 1 due date.

g. Half of the storage containers covered by refundable deposits were returned in March. The remaining containers are expected to be returned during the next six months.

Confirmed at the meeting of the department of "Socio-Economic Disciplines"

Minute №____ from ____ of 2015.

The dean of the faculty "International Educational Programs"

Ronald Voogdt _____________

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Date: 2015-12-11; view: 4917