Wiley Assignment
Brief Exercise 146
On January 1, 2013, JWS Corporation issued $649,000 of 7% bonds, due in 8 years. The bonds were issued for
$611,190, and pay interest each July 1 and January 1. JWS uses the effectiveinterest method.
Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the
December 31 adjusting entry. Assume an effectiveinterest rate of 8%. (Round answers to 0 decimal places, e.g.
$38,548. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No. Account Titles and Explanation
Debit
Credit
(a)
(b)
(c)
Exercise 1416
On January 1, 2013, McLean Company makes the two following acquisitions.
1. Purchases land having a fair value of $394,000 by issuing a 5year, zerointerestbearing promissory note in the
face amount of $663,913.
2. Purchases equipment by issuing a 6%, 9year promissory note having a maturity value of $566,000. (interest
payable annually).
The company has to pay 11% interest for funds from its bank.
(a)
(b)
Record the two journal entries that should be recorded by McLean Company for the two purchases on January
1, 2013.
Record the interest at the end of the first year on both notes using the effectiveinterest method.
(Round answers to 0 decimal places, e.g. $38,548.)
No.
Account Titles and Explanation
(a) 1.
2.
Debit
Credit
(b) 1.
2.
Exercise 1420
At December 31, 2012, Redmond Company has outstanding three longterm debt issues. The first is a
$2,025,300 note payable which matures June 30, 2015. The second is a $6,046,300 bond issue which matures
September 30, 2016. The third is a $12,559,000 sinking fund debenture with annual sinking fund payments of
$2,511,800 in each of the years 2014 through 2018.
Prepare the required note disclosure for the longterm debt at December 31, 2012.
Longterm Debt
2013
2014
2015
2016
2017
$
$
$
$
$
Brief Exercise 173
Carow Corporation purchased, as a heldtomaturity investment, $72,100 of the 9%, 5year bonds of Harrison, Inc. for
$78,100, which provides a 7% return. The bonds pay interest semiannually.
Prepare Carow’s journal entries for (a) the purchase of the investment, and (b) the receipt of semiannual interest and
premium amortization. Assume effectiveinterest amortization is used. (Round answers to 0 decimal places, e.g.
2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No. Account Titles and Explanation
Debit
Credit
(a)
(b)
Brief Exercise 174
Hendricks Corporation purchased trading investment bonds for $52,040 at par. At December 31, Hendricks received
annual interest of $2,580, and the fair value of the bonds was $49,530.
Prepare Hendricks’ journal entries for (a) the purchase of the investment, (b) the interest received, and (c) the fair
value adjustment. (Credit account titles are automatically indented when amount is entered. Do not indent
manually.)
No. Account Titles and Explanation
Debit
Credit
(a)
(b)
(c)
Problem 173
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment
purchases, and no credits, with the following descriptions.
Feb. 1, 2012
Sharapova Company common stock, $104 par, 208 shares
$45,800
April 1
U.S. government bonds, 12%, due April 1, 2022, interest payable April 1 and October
1, 113 bonds of $1,000 par each
113,000
July 1
McGrath Company 12% bonds, par $53,000, dated March 1, 2012, purchased at 104 plus
accrued interest, interest payable annually on March 1, due March 1, 2032
57,240
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are
classified as availableforsale. (Credit account titles are automatically indented when amount is entered. Do
not indent manually.)
Account Titles and Explanation
Debit
Credit
(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2012, using the
straightline method. (Round answers to 0 decimal places, e.g. $2,500. Credit account titles are automatically
indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(c) The fair values of the investments on December 31, 2012, were:
Sharapova Company common stock
$34,630
U.S. government bonds
146,910
McGrath Company bonds
59,710
What entry or entries, if any, would you recommend be made? (Round answers to 0 decimal places, e.g. $2,500.
Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(d) The U.S. government bonds were sold on July 1, 2013, for $120,100 plus accrued interest. Give the proper
entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
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