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EXAMINATION CARD ¹ 15

on the discipline “Financial Accounting II”

for the 3rd year students

 

1. What are four criteria of capital lease?

2. Universal Foods issued 10% bonds, dated January 1, with a face amount of $150 million on January 1, 2013. The bonds mature on December 31, 2027 (15 years). The market rate of interest for similar issues was 12%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method.

 

Required:

1. Determine the price of the bonds at January 1, 2013.

2. Prepare the journal entry to record their issuance by Universal Foods on January 1, 2013.

3. Prepare the journal entry to record interest on June 30, 2013.

4. Prepare the journal entry to record interest on December 31, 2020.

 

3. Allied Industries manufactures high-performance conveyers that often are leased to industrial customers. On December 31, 2013, Allied leased a conveyer to Poole Carrier Corporation for a three-year period ending December 31, 2016, at which time possession of the leased asset will revert back to Allied. Equal payments under the lease are $200,000 and are due on December 31 of each year. The first payment was made on December 31, 2013. Collectability of the remaining lease payments is reasonably assured, and Allied has no material cost uncertainties. The conveyer cost $450,000 to manufacture and has an expected useful life of six years. Its normal sales price is $659,805. The expected residual value of $150,000 at December 31, 2016, is guaranteed by United Assurance Group. Poole Carrier’s incremental borrowing rate and the interest rate implicit in the lease payments are 10%.

 

Required:

Prepare an amortization schedule describing the pattern of interest over the lease term.

Prepare the appropriate entries for both Poole on December 31, 2013.

 

 

Lecturer A. Kaldarova ______________________

 

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

Minute ¹____ from ____ of 2015.

The dean of the faculty "International Educational Programs"

Ronald Voogdt _____________

name signature

EXAMINATION CARD ¹ 16

on the discipline “Financial Accounting II”

for the 3rd year students

 

1. What distinguishes current liabilities from long-term liabilities?

2. Indicate (by letter) the way each of the investments listed below most likely should be accounted for based on the information provided.

Item

a) 35% of the nonvoting preferred stock of American Aircraft Company.

b) Treasury bills to be held to maturity.

c) Two-year note receivable from affiliate.

d) Accounts receivable.

e) Treasury bond maturing in one week.

f) Common stock held in trading account for immediate resale.

g) Bonds acquired to profit from short-term differences in price.

h) 35% of the voting common stock of Computer Storage Devices Company.

i) 90% of the voting common stock of Affiliated Peripherals, Inc.



j) Corporate bonds of Primary Smelting Company to be sold if interest rates fall ½%.

k) 25% of the voting common stock of Smith Foundries Corporation: 51% family-owned by Smith family; fair value determinable.

l) 17% of the voting common stock of Shipping Barrels Corporation: Investor’s CEO on the board of directors of Shipping Barrels Corporation

Reporting Category

T. Trading securities

M. Securities held-to-maturity

A. Securities available-for-sale

E. Equity method

C. Consolidation

N. None of these

 

3. Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2013, for $400 million. At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities. The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2013. Vancouver reported net income of $140 million for the year ended December 31, 2013. Vancouver paid a cash dividend of $30 million.

Required:

i. Prepare all appropriate journal entries related to the investment during 2013.

ii. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2013?

iii. What amount should Northwest report in its balance sheet as its investment in Vancouver?

 

 

Lecturer A. Kaldarova ______________________

 

 

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

Minute ¹____ from ____ of 2015.

The dean of the faculty "International Educational Programs"

Ronald Voogdt _____________

name signature


Date: 2015-12-11; view: 1696


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