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AltonAlton
Clothing purchased land, paying

$ 105 comma 000$105,000
cash plus a
$ 260 comma 000$260,000
note payable. In addition,
AltonAlton
paid delinquent property tax of
$ 1 comma 000$1,000,
title insurance costing
$ 1 comma 550$1,550,
and
$ 5 comma 400$5,400
to level the land and remove an unwanted building. Record the journal entry for purchase of the land.
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Click the icon to see the Worked Solution.

Begin by determining the cost of the land.
Purchase price of land $365,000
Add related costs:
Property taxes $1,000
Title insurance 1,550
Removal of building 5,400 7,950
Total cost of land $372,950
Record the journal entry for purchase of the land. (Record a single compound journal entry. Record debits
first, then credits. Select the explanation on the last line of the journal entry table.)
Date Accounts and Explanation Debit Credit
Land 372,950
Cash 112,950
Notes Payable 260,000
To record purchase of land with cash and note payable.
Concord Pet Care ClinicConcord Pet Care Clinic

paid
$ 160 comma 000$160,000
for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a
market value of
$ 85 comma 000$85,000,
the building
$ 68 comma 000$68,000,
and the equipment
$ 17 comma 000$17,000.
Journalize the lump-sum purchase of the three assets for a total cost of
$ 160 comma 000$160,000,
the amount for which the business signed a note payable. (Record a single compound journal entry.
Record debitsfirst, then credits. Select the explanation on the last line of the journal entry table.)
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Land 80,000
Building 64,000
Equipment 16,000
To record purchase of the assets with note payable.
At the beginning of the year,

South Bend AirlinesSouth Bend Airlines
purchased a used airplane for
$ 61 comma 000 comma 000$61,000,000.
South Bend AirlinesSouth Bend Airlines
expects the plane to remain useful for
fivefive
years
(6 comma 000 comma 0006,000,000
miles) and to have a residual value of
$ 7 comma 000 comma 000$7,000,000.
The company expects the plane to be flown
1 comma 600 comma 0001,600,000
miles the first year.
Read the
requirements
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.
Requirement 1a. Compute
South Bend AirlinesSouth Bend Airlines's
first-year depreciation expense on the plane using thestraight-line method.
Begin by selecting the formula to calculate the company's first-year depreciation expense on the plane
using the straight-line method. Then enter the amounts and calculate the depreciation for the first year.
Straight-line
( Cost - Residual value )/ Useful life = depreciation
( $61,000,000 - $7,000,000 )/ 5 = $10,800,000
Requirement 1b. Compute
first-year depreciation expense on the plane using theunits-of-production method.
Before calculating the first-year depreciation expense on the plane using the units-of-production method,
calculate the depreciation expense per unit. Select the formula, then enter the amounts and calculate the
depreciation per unit.
Depreciation per
( Cost - Residual value ) / Useful life in units = unit
( $61,000,000 - $7,000,000 )/ 6,000,000 = $9
Now, select the formula, enter the amounts, and calculate the company's first-year depreciation expense
on the plane using the units-of-production method.
Units-of-production
Depreciation per unit x Current year usage = depreciation
$9 x 1,600,000 = $14,400,000
Requirement 1c. Compute
first-year depreciation expense on the plane using thedouble-declining-balance method.
Begin by selecting the formula to calculate the company's first-year depreciation expense on the plane
using the double-declining-balance method. Then enter the amounts and calculate the depreciation
expense for the first year. (Enter "0" for items with a zero value.)
Double-
declining-
Accumulated balance
( Cost - depreciation ) x 2 x (1 / Useful life) = depreciation
( $61,000,000 - $0 )x 2 x (1 / 5) = $24,400,000
Requirement 2. Show the airplane's book value at the end of the first year for all three methods.
Double-declining-
Straight-Line Units-of-production balance
Cost $61,000,000 $61,000,000 $61,000,000
Less: Accumulated
Depreciation (10,800,000) (14,400,000) (24,400,000)
Book Value $50,200,000 $46,600,000 $36,600,000
At the beginning of
20162016,
Texas AeroTexas Aero
purchased a used airplane at a cost of
$ 61 comma 000 comma 000$61,000,000.
expects the plane to remain useful for
eighteight
years
(6 comma 000 comma 0006,000,000
miles) and to have a residual value of
$ 7 comma 000 comma 000$7,000,000.
expects the plane to be flown
1 comma 600 comma 0001,600,000
miles the first year and
1 comma 100 comma 0001,100,000
miles the second year.
Requirements
1. Compute second-year
(20172017)
depreciation expense on the plane using the following methods:
a. Straight-line
b. Units-of-production
c. Double-declining-balance
2. Calculate the balance in Accumulated Depreciation at the end of the second year for all three methods.
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Requirement 1a. Compute second-year
(20172017)
depreciation expense on the plane using the straight-line method.
Begin by selecting the formula to calculate the company's second-year depreciation expense on the plane
using the straight-line method. Then enter the amounts and calculate the depreciation expense for the
second year.
Straight-line
( Cost - Residual value )/ Useful life = depreciation
( $61,000,000 - $7,000,000 )/ 8 = $6,750,000
Requirement 1b. Compute second-year
(20172017)
depreciation expense on the plane using theunits-of-production method.
Before calculating the second-year depreciation expense on the plane using the units-of-production
method, calculate the depreciation expense per unit. Select the formula, then enter the amounts and
calculate the depreciation expense per unit.
Depreciation per
( $61,000,000 - $7,000,000 )/ 6,000,000 = $9
Now, select the formula, enter the amounts and calculate the company's second-year depreciation
expense on the plane using the
units-of-production method.
Units-of-production
Depreciation per unit x Current year usage = depreciation
$9 x 1,100,000 = $9,900,000
Requirement 1c. Compute second-year
(20172017)
depreciation expense on the plane using thedouble-declining-balance method.
Begin by selecting the formula to calculate the company's second-year depreciation expense on the plane
using the double-declining-balance method. Then enter the amounts and calculate the depreciation
expense for the second year.
Double-
declining-
Accumulated balance
( Cost - depreciation ) x 2 x (1 / Useful life) = depreciation
( $61,000,000 - $15,250,000 )x 2 x (1 / 8) = $11,437,500
Requirement 2. Calculate the balance in Accumulated Depreciation at the end of the second year for all
three methods.
Units-of- Double-declining-
Straight-Line production balance
Depreciation Expense - 2016 $6,750,000 $14,400,000 $15,250,000
Depreciation Expense - 2017 6,750,000 9,900,000 11,437,500
Accumulated Depreciation
ending balance $13,500,000 $24,300,000 $26,687,500
On
September 30September 30,
20152015,
Austin Sound CenterAustin Sound Center
purchased a copy machine for
$ 53 comma 400$53,400.
Austin Sound CenterAustin Sound Center
expects the machine to last for
sixsix
years and to have a residual value of
$ 3 comma 000$3,000.
Compute depreciation expense on the machine for the year ended December 31,
20152015,
using thestraight-line method.
Begin by selecting the formula to calculate the company's depreciation expense on the machine for the
year ended December 31,
20152015.
Then enter the amounts and calculate the depreciation expense.
Straight-line
Residual ) ]x Number of
[( Cost - Value / Useful Life ( Months / 12 ) = depreciation
) ]x
[( $53,400 - $3,000 / 6 ( 3 / 12 ) = $2,100
Assume that
Micron PrecisionMicron Precision
paid
$ 72 comma 000$72,000
for equipment with a
1818-year
life and zero expected residual value. After using the equipment for
sevenseven
years, the company determines that the asset will remain useful for only
fivefive
more years.
Read the
requirements
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.
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Requirement 1. Record depreciation expense on the equipment for year
88
by the straight-line method.
First, select the formula to calculate the company's revised depreciation expense on the equipment for
year
88.
Then enter the amounts and calculate the depreciation for year
88.
(Enter "0" for items with a zerovalue.)
Revised
Revised useful life
( Book value - Residual value )/ remaining = depreciation
( $44,000 - $0 )/ 5 = $8,800
Record the depreciation on the equipment for year
88.
(Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Depreciation Expense—Equipment 8,800
Accumulated Depreciation—Equipment 8,800
To record depreciation on equipment.

Requirement 2. What is accumulated depreciation at the end of year
88?
The accumulated depreciation at the end of year 8
is $ 36,800 .
On
JuneJune
15,
20152015,
FamilyFamily
Furniture discarded equipment that had a cost of
$ 15 comma 000$15,000,
a residual value of$0, and was fully depreciated. Journalize the disposal of the equipment. (Record debits
first, then credits. Select the explanation on the last line of the journal entry table.)
Equipment 15,000
Discarded fully depreciated equipment.
On
AugustAugust
3131,
20162016,
Just RightJust Right
Landscapes discarded equipment that had a cost of
$ 16 comma 600$16,600.
Accumulated Depreciation as of
DecemberDecember
31,
20152015,
was
$ 16 comma 000$16,000.
Assume annual depreciation on the equipment is
$ 600$600.
Journalize the partial-year depreciation expense and disposal of the equipment. (Record debits first, then
credits. Select the explanation on the last line of the journal entry table.)
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Journalize the partial-year depreciation expense.
Aug.
31 Depreciation Expense—Equipment 400
Accumulated Depreciation—Equipment 400
To record depreciation on equipment.
Calculate any gain or loss on the disposal of the equipment. (Enter a "0" for items with a zero value. Enter
a loss with a minus sign or parentheses.)
Market value of assets received $0
Less: Book value of asset disposed of
Cost $16,600
Less: Accumulated Depreciation (16,400) 200
Gain or (Loss) $(200)
Journalize the disposal of the equipment.
Aug.
31 Accumulated Depreciation—Equipment 16,400
Loss on Disposal 200
Equipment 16,600
Discarded equipment with a book value.
Apex CommunicationApex Communication

purchased equipment on
JanuaryJanuary
1,
20162016,
for
$ 32 comma 500$32,500.
Suppose
Apex CommunicationApex Communication
sold the equipment for
$ 24 comma 000$24,000
on
December 31 comma 2017.December 31, 2017.
DecemberDecember
31,
20172017,
was
$ 10 comma 000$10,000.
Journalize the sale of the equipment, assuming straight-line depreciation was used.
First, calculate any gain or loss on the disposal of the equipment.
Market value of assets received $24,000
Cost $32,500
Less: Accumulated Depreciation (10,000) 22,500
Gain or (Loss) $1,500
Now, journalize the sale of the equipment. (Record debits first, then credits. Select the explanation on the
last line of the journal entry table.)
Dec. 31 Cash 24,000
Equipment 32,500
Gain on Disposal 1,500
Sold equipment for cash.
PelmanPelman
Company purchased equipment on
JanuaryJanuary
1,
20162016,
for
$ 32 comma 000$32,000.
Suppose
PelmanPelman
sold the equipment for
$ 5 comma 000$5,000
on
December 31 comma 2017.December 31, 2017.
DecemberDecember
31,
20172017,
was
$ 22 comma 000$22,000.
Journalize the sale of the equipment, assuming straight-line depreciation was used.
First, calculate any gain or loss on the sale of the equipment. (Enter a loss with a minus sign or
parentheses.)
Cost $32,000
Gain or (Loss) $(5,000)
Now, journalize the sale of the equipment. (Record debits first, then credits. Select the explanation on the
last line of the journal entry table.)
Dec. 31 Cash 5,000
Loss on Disposal 5,000
Equipment 32,000
Sold equipment for cash.
Pacific PetroleumPacific Petroleum

holds huge reserves of oil assets. Assume that at the end of
20162016,
Pacific PetroleumPacific Petroleum's
cost of oil reserves totaled
$ 30 comma 000 comma 000 comma 000$30,000,000,000,
representing
3 comma 000 comma 000 comma 0003,000,000,000
barrels of oil.
Requirements
1. Which method does
use to compute depletion?
2. Suppose
removed and sold
600 comma 000 comma 000600,000,000
barrels of oil during
20172017.
Journalize depletion expense for
20172017.
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Requirement 1. Which method does
use to compute depletion?
Units-of-production
is the method used to compute depletion.

Requirement 2. Suppose
removed and sold
600 comma 000 comma 000600,000,000
barrels of oil during
20172017.
Journalize depletion expense for
20172017.
(Assume no residual value. Record debits first, then credits. Select the explanation on the last line of the
journal entry table.)
Depletion Expense—Oil Reserves 6,000,000,000
Accumulated Depletion—Oil Reserves 6,000,000,000
To record depletion.
Smith's AutoSmith's Auto

purchased a computer for
$ 3 comma 100$3,100,
debiting Computer Equipment. During
20142014
and
20152015,
recorded total depreciation of
$ 2 comma 500$2,500
on the computer. On
JanuaryJanuary
1,
20162016,
traded in the computer for a new one, paying
$ 2 comma 800$2,800
cash. The fair market value of the new computer is
$ 3 comma 800$3,800.
Journalize
Smith's AutoSmith's Auto's
exchange of computers. Assume the exchange had commercial substance.
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Let's begin by calculating the gain or loss on the exchange of computer equipment on
JanuaryJanuary
1.
Less:
Book value of asset exchanged $600
Cash paid 2,800 3,400
Gain or (Loss) $400
Journalize
Smith's AutoSmith's Auto's
exchange of computers. (Record a single compound journal entry. Record debitsfirst, then credits. Select
the explanation on the last line of the journal entry table.)
Jan. 1 Computer Equipment (new) 3,800
Accumulated Depreciation—Computer Equipment 2,500
Computer Equipment (old) 3,100
Cash 2,800
Gain on Disposal 400
Exchanged old computer equipment and cash for new computer

equipment.
RedRed
Corporation purchased equipment for
$ 14 comma 000$14,000.
RedRed
recorded total depreciation of
$ 5 comma 000$5,000
on the equipment. On
January 1 comma 2016 commaJanuary 1, 2016,
RedRed
traded in the equipment for new equipment, paying
$ 23 comma 600$23,600
cash. The fair market value of the new equipment is
$ 31 comma 400.$31,400.
Journalize
RedRed
Corporation's exchange of equipment. Assume the exchange had commercial substance.
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Let's begin by calculating the gain or loss on the exchange of equipment. (Enter a loss with a minus sign
or parentheses.)
Less:
Book value of asset exchanged $9,000
Cash paid 23,600 32,600
Journalize
RedRed
Corporation's exchange of equipment. (Record a single compound journal entry. Record debits first, then
Equipment (new) 31,400
Equipment (old) 14,000
Cash 23,600
Exchanged old equipment and cash for new equipment.
Which cost is not recorded as part of the cost of a building?

A.
Construction materials and labor
B.
Real estate commission paid to buy the building
C.
Concrete for the building's foundation
D.
Annual building maintenance
Your answer is correct.
How should you record a capital expenditure?

A.
Debit capital
B.
Debit a liability
C.
Debit an asset
D.
Debit an expense
Which method almost always produces the most depreciation in the first year?
A.
Straight-line
B.
Units-of-production
C.
Double-declining-balance
D.
All produce the same depreciation in the first year.
AnAn
Americana AirwayAmericana Airway
jet costs
$ 28 comma 000 comma 000$28,000,000
and is expected to fly
200 comma 000 comma 000200,000,000
miles during its
88-year
life. Residual value is expected to be zero because the plane was used when acquired. If the plane
travels
28 comma 000 comma 00028,000,000
miles the first year, how much depreciation should
Americana AirwayAmericana Airway
record under theunits-of-production method? (Round the depreciation per unit to two decimal places.)
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$ 3 comma 920 comma 000$3,920,000
= ((cost - residual value) / useful life in units) x current year usage =
(($ 28 comma 000 comma 000$28,000,000
- 0) /
200 comma 000 comma 000200,000,000)
x 28 comma 000 comma 000
A.
$ 7 comma 000 comma 000$7,000,000
B.
$ 3 comma 920 comma 000$3,920,000
C.
$ 3 comma 500 comma 000$3,500,000
D.
Cannot be determined from the data given
A copy machine cost

$ 50 comma 000$50,000
when new and has accumulated depreciation of
$ 33 comma 000$33,000.
Suppose
Copy CenterCopy Center
junks this machine, receiving nothing. What is the result of the disposal transaction?
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A.
No gain or loss
B.
Loss of $ 17 comma 000$17,000
C.
Gain of $ 17 comma 000$17,000
D.
Loss of $ 36 comma 000
A copy machine cost
$ 41 comma 000$41,000
$ 25 comma 000$25,000.
Suppose
Copy CenterCopy Center
sold the machine for
$ 16 comma 000$16,000.
What is the result of this disposal transaction?
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A.
Loss of $ 25 comma 000$25,000
B.
Gain of $ 16 comma 000$16,000
C.
Loss of $ 16 comma 000$16,000
D.
No gain or loss
Which method is used to compute depletion?

A.
Double-declining-balance method
B.
Depletion method
C.
Units-of-production method
D.
Straight-line method
Which intangible asset is recorded only as part of the acquisition of another company?
A.
Copyright
B.
Goodwill
C.
Franchise
D.
Patent
ChoiceChoice
Corporation reported beginning and ending total assets of
$ 40 comma 000$40,000
and
$ 36 comma 000$36,000,
respectively. Its net sales for the year were
$ 26 comma 600$26,600.
What was
ChoiceChoice's
$ 38 comma 000$38,000
= (beginning total assets + ending total assets) / 2 =
($ 40 comma 000$40,000
+
$ 36 comma 000$36,000)
/2
0.700.70
= net sales / average total assets =
$ 26 comma 600$26,600
/ $ 38 comma 000
asset turnover ratio?

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A.
1.431.43
B.
0.740.74
C.
0.700.70
D.
0.670.67
A truck costs
$ 108 comma 000$108,000
$ 90 comma 000$90,000.
Suppose
JakeJake
Towing exchanges the truck for a new truck. The new truck has a market value of
$ 65 comma 000$65,000,
and
JakeJake
pays cash of
$ 41 comma 000$41,000.
Assume the exchange has commercial substance. What is the result of this exchange?
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$ 6 comma 000$6,000
gain = market value of assets received - (book value of asset exchanged + cash paid) =
$ 65 comma 000$65,000
-
($ 18 comma 000$18,000
+
$ 41 comma 000$41,000)
A.
No gain or loss
B.
Loss of $ 6 comma 000$6,000
C.
Gain of $ 6 comma 000$6,000
D.
Gain of $ 47 comma 000
LavalleeLavallee
Furniture purchased land, paying
$ 70 comma 000$70,000
cash plus a
$ 260 comma 000$260,000
note payable. In addition,
LavalleeLavallee
paid delinquent property tax of
$ 2 comma 500$2,500,
title insurance costing
$ 5 comma 000$5,000,
and
$ 6 comma 000$6,000
to level the land and remove an unwanted building. The company then constructed an office building at a
cost of
$ 400 comma 000$400,000.
It also paid
$ 54 comma 000$54,000
for a fence around the property,
$ 20 comma 000$20,000
for a sign near the entrance, and
$ 9 comma 000$9,000
for special lighting of the grounds.
Read the
requirements
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Requirement 1
Land
Land Improvements Building
Cash $ 70 comma 000$70,000
Note payable $ 260 comma 000$260,000
Property tax $ 2 comma 500$2,500
Title insurance $ 5 comma 000$5,000
Remove building $ 6 comma 000$6,000
Construct building $ 400 comma 000$400,000
Fence $ 54 comma 000$54,000
Sign $ 20 comma 000$20,000
Lighting $ 9 comma 000$9,000
Totals $ 343 comma 500$343,500 $ 83 comma 000$83,000 $ 400 comma 000$400,000
.
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Requirement 1. Determine the cost of the land, land improvements, and building.
The cost of the land is
$ 343,500 .
The total cost of the land improvements
is $ 83,000 .
The cost of the building is
$ 400,000 .
Requirement 2. Which of these assets will
LavalleeLavallee
depreciate?
LavalleeLavallee
will depreciate
the building and the land improvements.
Granny'sGranny's
Fried Chicken bought equipment on
JanuaryJanuary
22,
20162016,
for
$ 30 comma 000$30,000.
The equipment was expected to remain in service for four years and to perform
6 comma 0006,000
fry jobs. At the end of the equipment's useful life,
Granny'sGranny's
estimates that its residual value will be
$ 6 comma 000.$6,000.
The equipment performed
600600
jobs the first year,
1 comma 8001,800
the second year,
2 comma 4002,400
the third year, and
1 comma 2001,200
the fourth year.
Requirements
1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for
the equipment under the three depreciation methods. Show your computations. Note: Three
depreciation schedules must be prepared.
2. Which method tracks the wear and tear on the equipment most closely?
Worked Solution
Requirement 1
Depreciable cost =
$ 30 comma 000$30,000
-
$ 6 comma 000$6,000
=
$24 comma 00024,000
Straight-Line Depreciation Schedule
Depreciation for the Year
Date Asset Depreciable Depreciation Depreciation Accumulated
Cost Cost Rate Expense Depreciation (AD)
(AD prior + DepExpense
1/01/13 $ 30 comma 000$30,000
12/31/13 $24 comma 00024,000 1/4 $6 comma 0006,000 $6 comma 0006,000
12/31/14 24 comma 00024,000 1/4 6 comma 0006,000 $ 12 comma 000$12,000
Depreciation per unit = (Cost - Residual value) / Useful life in units
= ($ 30 comma 000$30,000
-
$ 6 comma 000$6,000)
/
6 comma 0006,000
fry jobs
= $44
per fry job
Units-of-Production Depreciation Schedule
Accumulated
Asset Depreciation Number Depreciation Depreciation (AD)
Date Cost per Unit of Units Expense (AD prior + DepExpense)
1/01/13 $ 30 comma 000$30,000 $3
12/31/13 $44 600600 $2 comma 4002,400 $2 comma 4002,400 $ 2
12/31/14 44 1 comma 8001,800 7 comma 2007,200 $ 9 comma 600$9,600 $ 2
12/31/15 44 2 comma 4002,400 9 comma 6009,600 $ 19 comma 200$19,200 $ 1
12/31/16 44 1 comma 2001,200 4 comma 8004,800 $ 24 comma 000$24,000
Double-Declining-Balance Depreciation Schedule
Accumulated
Asset Book DDB Depreciation Depreciation (AD)
Date Cost Value Rate Expense (AD prior + Dep Expe
1/01/13 $ 30 comma 000$30,000
12/31/13 $ 30 comma 000$30,000 2 x (1 / 4) $ 15 comma 000$15,000 $ 15 comma 000$15
12/31/14 $ 15 comma 000$15,000 2 x (1 / 4) $ 7 comma 500$7,500 $ 22 comma 500$22
12/31/15 $ 7 comma 500$7,500 1 comma 5001,500* $ 24 comma 000$24
12/31/16 0 $ 24 comma 000$24
*3rd year depreciation is the "plug figure" needed to reduce book value to residual value
($ 7 comma 500$7,500
-
$ 6 comma 000$6,000)
Review Only
Requirement 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value
per year for the equipment under the three depreciation methods. Show your computations. Note: Three
depreciation schedules must be prepared.
Begin by preparing a depreciation schedule using the straight-line method.
Straight-Line Depreciation Schedule
Asset Depreciable Depreciation Depreciation Accumulated Book
Date Cost Cost Rate Expense Depreciation Value
1-2-2016 $30,000 $30,000
12-31-
2016 $24,000 / 4 years = $6,000 $6,000 24,000
12-31-
2017 24,000 / 4 years = 6,000 12,000 18,000
12-31-
2018 24,000 / 4 years = 6,000 18,000 12,000
12-31-
2019 24,000 / 4 years = 6,000 24,000 6,000
Before completing the units-of-production depreciation schedule, calculate the depreciation expense per
unit.
Depreciation per
( $30,000 - $6,000 )/ 6,000 = $4
Prepare a depreciation schedule using the units-of-production method.
Units-of-Production Depreciation Schedule
Asset Depreciation Number of Depreciation Accumulated Book
Date Cost Per Unit Units Expense Depreciation Value
1-2-2016 $30,000 $30,000
12-31-
2016 $4 x 600 = $2,400 $2,400 27,600
12-31-
2017 4 x 1,800 = 7,200 9,600 20,400
12-31-
2018 4 x 2,400 = 9,600 19,200 10,800
12-31-
2019 4 x 1,200 = 4,800 24,000 6,000
Prepare a depreciation schedule using the double-declining-balance (DDB) method. (Enter a "0" for any
items with a zero value.)
Double-Declining-Balance Depreciation Schedule
Asset Book DDB Depreciation Accumulated Book
Date Cost Value Rate Expense Depreciation Value
1-2-2016 $30,000 $30,000
12-31-
2016 $30,000 x 2 x (1/4) = $15,000 $15,000 15,000
12-31-
2017 15,000 x 2 x (1/4) = 7,500 22,500 7,500
12-31-
2018 = 1,500 24,000 6,000
12-31-
2019 = 0 24,000 6,000
Requirement 2. Which method tracks the wear and tear on the equipment most closely?
The
units-of-production
method tracks wear and tear most closely.
DiscountDiscount
Hardware Consultants purchased a building for
$ 454 comma 000$454,000
and depreciated it on a straight-line basis over a
3535-year
period. The estimated residual value is
$ 104 comma 000$104,000.
After using the building for 15 years,
DiscountDiscount
realized that wear and tear on the building would wear it out before
3535
years and that the estimated residual value should be
$ 94 comma 000$94,000.
Starting with the 16th year,
DiscountDiscount
began depreciating the building over a revised total life of
2525
years using the new residual value. Journalize depreciation expense on the building for years 15 and 16.
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Begin by journalizing the depreciation on the building for year 15.
Depreciation Expense—Building 10,000
Accumulated Depreciation—Building 10,000
To record depreciation on building.

Now, journalize the depreciation on the building for year 16.
Depreciation Expense—Building 21,000
Accumulated Depreciation—Building 21,000
To record depreciation on building.
On
JanuaryJanuary
2,
20152015,
FamilyFamily
Clothing Consignments purchased showroom fixtures for
$ 15 comma 000$15,000
cash, expecting the fixtures to remain in service for five years.
FamilyFamily
has depreciated the fixtures on adouble-declining-balance basis, with zero residual value. On
October 31 commaOctober 31,
20162016,
FamilyFamily
sold the fixtures for
$ 6 comma 200$6,200
cash. Record both depreciation expense for
20162016
and sale of the fixtures on
October 31October 31,
20162016.
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Begin by recording the depreciation expense for
20162016.
Oct. 31 Depreciation Expense—Fixtures 3,000
Accumulated Depreciation—Fixtures 3,000
To record depreciation on fixtures.

Before recording the sale of the fixtures, let's calculate any gain or loss on the sale of the fixtures.
Cost $15,000
Gain or (Loss) $200
Now, record the sale of the fixtures on
October 31October 31,
20162016.
Oct. 31 Cash 6,200
Fixtures 15,000
Gain on Disposal 200
Sold fixtures for cash.
On
JanuaryJanuary
2,
20142014,
Royal PetRoyal Pet
purchased fixtures for
$ 39 comma 400$39,400
cash, expecting the fixtures to remain in service for
eighteight
years.
Royal PetRoyal Pet
has depreciated the fixtures on a straight-line basis, with
$ 1 comma 000$1,000
residual value. On
AugustAugust
3131,
20162016,
Royal PetRoyal Pet
sold the fixtures for
$ 24 comma 600$24,600
cash. Record both depreciation expense for
20162016
and sale of the fixtures on
AugustAugust
3131,
20162016.
(Assume the modified half-month convention is used. Record debits first, then credits. Select the
explanation on the last line of the journal entry table.)
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Begin by recording the depreciation expense for
20162016.
Aug.
31 Depreciation Expense—Fixtures 3,200
To record depreciation on fixtures.

Before recording the sale of the fixtures, let's calculate any gain or loss on the sale of the fixtures. (Enter
a loss with a minus sign or parentheses.)
Cost $39,400
Now, record the sale of the fixtures on
AugustAugust
3131,
20162016.
Aug.
31 Cash 24,600
Fixtures 39,400
Sold fixtures for cash.
MightyMighty
Mountain Mining paid
$ 266 comma 500$266,500
for the right to extract mineral assets from a
200 comma 000200,000-ton
deposit. In addition to the purchase price,
MightyMighty
also paid a
$ 1 comma 100$1,100
filing fee, a
$ 2 comma 400$2,400
license fee to the state ofNevada, and
$ 50 comma 000$50,000
for a geological survey of the property. Because
MightyMighty
purchased the rights to the minerals only, it expects the asset to have a zero residual value. During the
first year,
MightyMighty
removed and sold
30 comma 00030,000
tons of the minerals. Make journal entries to record (a) purchase of the minerals (debit Minerals), (b)
payment of fees and other costs, and (c) depletion for the first year. (Record debits first, then credits.
Select the explanation on the last line of the journal entry table.)
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Begin by journalizing (a) the purchase of the minerals (debit Mineral asset). (Do not record payment for
any additional costs associated with the minerals. We will do this in entry b.)
a. Minerals 266,500
Cash 266,500
To record purchase of mineral rights.

Journalize (b) the payment of fees and other costs. (Record a single compound journal entry.)
b. Minerals 53,500
Cash 53,500
To record payment of costs associated with purchase of

minerals.
Journalize (c) the depletion for the first year. (Round depletion per ton to the nearest cent.)
c. Depletion Expense—Minerals 48,000
Accumulated Depletion—Minerals 48,000
To record depletion.
HonestHonest
Trucking Corporation uses the units-of-production depreciation method because units-of-production best
measures wear and tear on the trucks. Consider these facts about one Mack truck in the company's fleet.
When acquired in
20132013,
the rig cost
$ 420 comma 000$420,000
and was expected to remain in service for 10 years or1,000,000 miles. Estimated residual value was
$ 190 comma 000$190,000.
The truck was driven
78 comma 00078,000
miles in
20132013,
118 comma 000118,000
miles in
20142014,
and
158 comma 000158,000
miles in
20152015.
After
38 comma 00038,000
miles, on
MarchMarch
1515,
20162016,
the company traded in the Mack truck for a less expensive Freightliner.
HonestHonest
also paid cash of
$ 31 comma 000$31,000.
Fair market value of the Mack truck was equal to its net book value on the date of the trade.
Read the
requirements
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.
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Requirement 1. Record the journal entry for depreciation expense in
20162016.
Mar. 15 Depreciation Expense—Truck 8,740
Accumulated Depreciation—Truck 8,740
To record depreciation on truck.
Requirement 2. Determine
HonestHonest's
cost of the new truck.
The cost of the new truck is
$ 360,840 360,840.
Requirement 3. Record the journal entry for the exchange of assets on
MarchMarch
1515,
20162016.
Assume the exchange had commercial substance. (Record a single compound journal entry. Record
debits first, then credits. Select the explanation on the last line of the journal entry table.)
Mar. 15 Truck (new) 360,840
Accumulated Depreciation—Truck 90,160
Truck (old) 420,000
Cash 31,000
Exchanged old truck and cash for new truck.
On January 1,
20162016,
Linberg minus FinchLinberg−Finch
signed a
$ 400 comma 000$400,000,
88-year,
1212%
note. The loan required
Linberg minus FinchLinberg−Finch
to make annual payments on December 31 of
$ 50 comma 000$50,000
principal plus interest.
Requirements
1. Journalize the issuance of the note on January 1,
20162016.
2. Journalize the first note payment on December 31,
20162016.
(Record debits first, then credits. Select explanations on the last line of the journal entry.)
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Requirement 1. Journalize the issuance of the note on January 1,
20162016.
Date Accounts and Explanations Debit Credit
2016 Cash 400,000
Jan. 1 Notes Payable 400,000
Received cash in exchange for a note.

Requirement 2. Journalize the first note payment on December 31,
20162016.
2016 Notes Payable 50,000
Dec.
31 Interest Expense 48,000
Cash 98,000
Paid principal and interest payment.
Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether
the following bonds payable will be issued at face value, at a premium, or at a discount:
a. The market interest rate is 8%. Idaho issues bonds payable with a stated rate of 7.75%.
b. Austin issued 9% bonds payable when the market interest rate was 8.25%.
c. Cleveland's Cars issued 10% bonds when the market interest rate was 10%.
d. Atlanta's Tourism issued bonds payable that pay the stated interest rate of 8.5%. At issuance, the market
interest rate was 10.25%.
a The market interest rate is 8%. Idaho issues bonds payable with a stated rate of
. 7.75%. Discount
Austin issued 9% bonds payable when the market interest rate was
b. 8.25%. Premium
Cleveland's Cars issued 10% bonds when the market interest rate was
c. 10%. Face value
Atlanta's Tourism issued bonds payable that pay the stated interest rate of
d. 8.5%. At issuance, the Discount
market interest rate was 10.25%.
Bond prices depend on the market rate of interest, stated rate of interest, and time.
Read the
requirements
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.
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Requirement 1. Compute the price of the following
66%
bonds of
StateState
Telecom.
The price of the $400,000 bond issued at
a. 76.50 is $ 306,000 .
b. 104.50 is $ 418,000 .
c. 96.25 is $ 385,000 .
c. 103.50 is $ 414,000 .
Requirement 2. Which bond will
StateState
Telecom have to pay the most to retire at maturity? Explain your answer.
State Telecom will pay $400,000 at maturity for all four of the bonds. The bonds all have the same
maturity value.
SonicSonic
Drive-Ins borrowed money by issuing
$ 5 comma 500 comma 000$5,500,000
of
4 %4%
bonds payable at
91.591.5.
Requirements
1. How much cash did
SonicSonic
receive when it issued the bonds payable?
2. How much must
SonicSonic
pay back at maturity?
3. How much cash interest will
SonicSonic
pay each six months?
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Requirement 1. How much cash did
SonicSonic
receive when it issued the bonds payable?
when the bonds payable were
Sonic received $5,032,500 issued.
Requirement 2. How much must
SonicSonic
pay back at maturity?
At maturity, Sonic must pay
back $5,500,000 .
Requirement 3. How much cash interest will
SonicSonic
pay each six months?
each six
Sonic will pay interest of $110,000 months.
PuppaPuppa
Company issued
aa
$ 1 comma 000 comma 000$1,000,000,
4 %4%,
1010-year
bond payable at at face value on January 1,
20162016.
Requirements
1. Journalize the issuance of the bond payable on January 1,
20162016.
2. Journalize the payment of semiannual interest on July 1,
20162016.
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Requirement 1. Journalize the issuance of the bond payable on January 1,
20162016.
2016 Cash 1,000,000
Jan. 1 Bonds Payable 1,000,000
Issued bonds at face value.

Requirement 2.
Journalize the payment of semiannual interest on July 1,
20162016.
Jul. 1 Cash 20,000
Paid semiannual interest.
OliverOliver
issued a
$ 100 comma 000$100,000,
9 %9%,
1010-year
bond payable at
9494
on January 1,
20162016.
Requirements
20162016.
2. Journalize the payment of semiannual interest and amortization of the bond discount or premium on July 1,
20162016.
(Assume bonds payable are amortized using the straight-line amortization method. Record debits first,
then credits. Select explanations on the last line of the journal entry. Round your answers to the nearest
whole dollar.)
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20162016.
2016 Cash 94,000
Jan. 1 Discount on Bonds Payable 6,000
Bonds Payable 100,000
Issued bonds at a discount.

Requirement 2. Journalize the payment of semiannual interest and amortization of the bond discount or
premium on July 1,
20162016.
Jul. 1 Discount on Bonds Payable 300
Cash 4,500
Paid semiannual interest and amortized

discount.
WashingtonWashington
Mutual Insurance Company issued a
$ 70 comma 000$70,000,
10 %10%,
1010-year
bond payable at
107107
on January 1,
20162016.
Requirements
20162016.
2. Journalize the payment of semiannual interest and amortization of the bond discount or premium on July 1,
20162016.
then credits. Select explanations on the last line of the journal entry. Round your answers to the nearest
whole dollar.)
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20162016.
2016 Cash 74,900
Jan. 1 Bonds Payable 70,000
Premium on Bonds Payable 4,900
Issued bonds at a premium.

Requirement 2. Journalize the payment of semiannual interest and amortization of the bond discount or
premium on July 1,
20162016.
Jul. 1 Premium on Bonds Payable 245
Cash 3,500
Paid semiannual interest and amortized premium.
DavisDavis
issued a
$ 100 comma 000$100,000,
8.08.0%,
55-year
bond payable. Journalize the following transactions for
DavisDavis
and include an explanation for each entry:
a. Issuance of the bond payable at face value on January 1,
20162016.
b. Payment of semiannual cash interest on July 1,
20162016.
c. Payment of the bond payable at maturity. (Give the date.)
(Record debits first, then credits. Select explanations on the last line of the journal entry. Round your
answers to the nearest whole dollar.)
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a. Issuance of the bond payable at face value on January 1,
20162016.
2016 Cash 100,000
Issued bonds payable.

b. Payment of semiannual cash interest on July 1,
20162016.
(Round your answer to the nearest whole dollar.)
Jul. 1 Cash 4,000
Paid semiannual interest payment.
c. Payment of the bond payable at maturity. (Give the date.) (All interest has been paid to date.)
2021 Bonds Payable 100,000
Jan. 1 Cash 100,000
Retired bonds payable at maturity.
On January 1,
20162016,
PetersonPeterson
issued
$ 350 comma 000$350,000
of
99%,
fivefive-year
bonds payable at
106106.
PetersonPeterson
has extra cash and wishes to retire the bonds payable on January 1,
20172017,
immediately after making the second semiannual interest payment. To retire the bonds,
PetersonPeterson
pays the market price of
9494.
Requirements
1. What is
PetersonPeterson's
carrying amount of the bonds payable on the retirement date?
2. How much cash must
PetersonPeterson
pay to retire the bonds payable?
3. Compute
PetersonPeterson's
gain or loss on the retirement of the bonds payable.
(Assume bonds payable are amortized using the straight-line amortization method.)
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Requirement 1. What is
PetersonPeterson's
carrying amount of the bonds payable on the retirement date?
The carrying amount of the bonds payable on the retirement date is
$ 366,800 366,800.
Requirement 2. How much cash must
PetersonPeterson
pay to retire the bonds payable?
To retire the bonds
PetersonPeterson
must pay
$ 329000 329000.
Requirement 3. Compute
PetersonPeterson's
gain or loss on the retirement of the bonds payable. (Use parentheses or a minus sign for losses.)
PetersonPeterson's
gain or loss on the retirement of the bonds payable is
$ 37800 37800.
GreatcoGreatco
signed a
1212-year
note payable on January 1,
20162016,
of
$ 780 comma 000$780,000.
The note requires annual principal payments each December 31 of
$ 65 comma 000$65,000
plus interest at
1010%.
The entry to record the annual payment on December 31,
20182018,
includes
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A.
a debit to Interest Expense for
$ 78 comma 000$78,000.
Your answer is not correct.
B.
a credit to Cash of
$ 143 comma 000$143,000.
C.
a credit to Notes Payable for
$ 65 comma 000$65,000.
D.
a debit to Interest Expense for
$ 65 comma 000$65,000.
This is the correct answer.
Daniels's bonds payable carry a stated interest rate of 5%, and the market rate of interest is 7%. The
price of the Daniels's bonds will be at
A.
a discount.
B.
par value.
C.
face value.
D.
a premium.
A bond that matures in installments at regular intervals is a

A.
serial bond.
B.
terminal bond.
C.
term bond.
D.
periodic bond.
Nick SpanosNick Spanos

Antiques issued its
88%,
2020-year
bonds payable at a price of
$ 649 comma 760$649,760
(face value is
$ 700 comma 000$700,000).
The company uses thestraight-line amortization method for the bond discount or
premium.
Interest expense for each year is
(Round your answer to the nearest whole dollar.)
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A.
$ 58 comma 512$58,512.
B.
$ 56 comma 000$56,000.
C.
$ 51 comma 981$51,981.
D.
$ 53 comma 488$53,488.
Carolina McKnightCarolina McKnight
Fitness Gym has
$ 500 comma 000$500,000
of
1010-year
bonds payable outstanding. These bonds had a discount of
$ 30 comma 000$30,000
at issuance, which was
55
years ago. The company uses the straight-line amortization method. The current carrying amount of
these bonds payable is
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A.
$ 485 comma 000$485,000.
B.
$ 515 comma 000$515,000.
C.
$ 470 comma 000$470,000.
D.
$ 500 comma 000$500,000.
Vasquez issued a $400,000 face value, 8%, 20-year bond at 95. Which of the following is the correct
journal entry to record the retirement of the bond at maturity?
A.
Cash 380,000
B.
Cash 380,000
C.
Cash 400,000
D.
Cash 400,000
Welch CorporationWelch Corporation's

trial balance shows
$ 105 comma 000$105,000
face value of bonds with a discount balance of
$ 2 comma 600$2,600.
The bonds mature in 10 years. How will the bonds be presented on the balance sheet?
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A.
Bonds payable
$ 105 comma 000$105,000
will be listed as a long-term liability. A
$ 2 comma 600$2,600
discount on bonds payable will be listed as a contra current liability.
B.
Bonds payable
$ 102 comma 400$102,400
(net of
$ 2 comma 600$2,600
discount) will be listed as a long-term liability.
C.
Bonds payable
$ 105 comma 000$105,000
will be listed as a long-term liability. A
$ 2 comma 600$2,600
discount on bonds payable will be listed as a current liability.
D.
Bonds payable
$ 105 comma 000$105,000
will be listed as a long-term liability.
The debt to equity ratio is calculated as

A.
Total liabilities / Total equity.
B.
Total liabilities / Total assets.
C.
Current liabilities / Total equity.
D.
Total assets / Total equity.
GaryGary
AndersonAnderson
wishes to have
$ 130 comma 000$130,000
in
sevenseven
years. If he can earn annual interest of
1010%,
how much must he invest today?
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(Click
the icon to view the Present Value of $1 table.)
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(
Click the icon to view the Present Value of Annuity of $1 table.)
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(Click
the icon to view the Future Value of $1 table.)
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(Click
the icon to view the Future Value of Annuity of $1 table.)
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A.
$ 121 comma 290$121,290
B.
$ 253 comma 370$253,370
C.
$ 66 comma 690$66,690
D.
$ 2 comma 610$2,610
TorresTorres
Corporation issued
$ 450 comma 000$450,000
of
77%,
10-year bonds payable at a price of
9595.
The market interest rate at the date of issuance was
88%,
and the bonds pay interest semiannually. The journal entry to record the first semiannual interest
payment using the effective-interest amortization method is
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A.
Interest Expense 19,350
Discount on Bonds Payable 1,350
Cash 18,000
B.
Cash 18,000
C.
Cash 15,750
D.
Cash 15,750
Consider the following note payable transactions of

CampbellCampbell
Video Productions.
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(Click
the icon to view the transactions.)
Requirements
1. Journalize the transactions for the company.
2. Considering the given transactions only, what are
CampbellCampbell
Video Productions' total liabilities on December 31,
20172017?
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Requirement 1. Journalize the transactions for the company.
Sep.Sep.
1,
20162016:
Purchased equipment costing
$ 270 comma 000$270,000
by issuing
aa
ninenine-year,
77%
note payable. The note requires annual principal payments of
$ 30 comma 000$30,000
plus interest each
Sep.Sep.
1. (Record debits first, then credits. Select explanations on the last line of the journal entry.)
2016 Equipment 270,000
Sep. 1 Notes Payable 270,000
Purchased equipment by issuing a 9-year, 7% note.

Dec 31,
20162016:
Accrued interest on the note payable.
Dec. 31 Interest Payable 6,300
Recognized accrued interest.

Sep.Sep.
1,
20172017:
Paid the first installment on the note.
Sep. 1 Interest Payable 6,300
Cash 48,900
Paid first installment of note.
Dec 31,
20172017:
Accrued interest on the note payable.
Dec. 31 Interest Payable 5,600
Recognized accrued interest.

Requirement 2. Considering the given transactions only, what are
CampbellCampbell
Video Productions total liabilities on December 31,
20172017?
The total liabilities of
CampbellCampbell
Video Productions on December 31,
20172017
are
$ 245600 245600.
KalerKaler
Company purchased a building and land with a fair market value of
$ 525 comma 000$525,000
(building,
$ 400 comma 000$400,000
and land,
$ 125 comma 000$125,000)
on January 1,
20162016.
KalerKaler
signed a
1515-year,
1010%
mortgage payable.
KalerKaler
will make monthly payments of
$ 5 comma 641.68$5,641.68.
Requirements
1. Journalize the mortgage payable issuance on January 1,
20162016
(explanations are not required).
2. Prepare an amortization schedule for the first two payments.
3. Journalize the first payment on January 31,
20162016
(round to two decimal places).
4. Journalize the second payment on February 29,
20162016
(round to two decimal places).
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Requirement 1. Journalize the mortgage payable issuance on January 1,
20162016
(explanations are not required). (Record debits first, then credits. Exclude explanations from any journal
entries.)
Date Accounts Debit Credit
2016 Building 400,000.00
Jan. 1 Land 125,000.00
Mortgage Payable 525,000.00
Requirement 2. Prepare an amortization schedule for the first two payments. (Round all numbers to the
nearest cent.)
Beginning Principal Interest Total Ending
Balance Payment Expense Payment Balance
1/1/2016 $525,000.00
1/31/2016 $525,000.00 $1,266.68 $4,375.00 $5,641.68 523,733.32
2/28/2016 523,733.32 1,277.24 4,364.44 5,641.68 522,456.08
Requirement 3. Journalize the first payment on January 31,
20162016
(round to two decimal places). (Enter amounts to the nearest cent. Record debits first, then credits.
Exclude explanations from any journal entries.)
2016 Mortgage Payable 1,266.68
Jan. 31 Interest Expense 4,375.00
Cash 5,641.68
Requirement 4. Journalize the second payment on February 29,

20162016
(round to two decimal places). (Enter amounts to the nearest cent. Record debits first, then credits.
Exclude explanations from any journal entries.)
2016 Mortgage Payable 1,277.24
Feb. 29 Interest Expense 4,364.44
Cash 5,641.68
On June 30,
PrincePrince
Company issues
11 %11%,
55-year
bond payable with at face value of
$ 110 comma 000$110,000.
The bonds are issued at face value and pay interest on June 30 and December 31.
Requirements
1. Journalize the issuance of the bonds on June 30.
2. Journalize the semiannual interest payment on December 31.
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Requirement 1. Journalize the issuance of the bonds on June 30.
June 30 Cash 110,000
Issued bonds at face value.

Requirement 2. Journalize the semiannual interest payment on December 31.
Dec. 31 Interest Expense 6,050
Cash 6,050
Paid semiannual interest.
On June 30,
DanverDanver
Limited issues
8 %8%,
20-year bonds payable with a face value of
$ 100 comma 000$100,000.
The bonds are issued at
9696
and pay interest on June 30 and December 31. (Assume bonds payable are amortized using the straight-
line amortization method.)
Requirements
1. Journalize the issuance of the bonds on June 30.
2. Journalize the semiannual interest payment and amortization of the bond discount on December 31.
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Requirement 1. Journalize the issuance of the bonds on June 30. (Record debits first, then credits.
Select explanations on the last line of the journal entry.)
Jun. 30 Cash 96,000
Issued bonds at a discount.

Requirement 2. Journalize the semiannual interest payment and amortization of the bond discount on
December 31. (Record debits first, then credits. Select explanations on the last line of the journal entry.)
Dec. 31 Interest Expense 4,100
Discount on Bonds Payable 100
Cash 4,000
Paid semiannual interest and amortized discount.
JeffersonJefferson
issued
$ 100 comma 000$100,000
of 10-year,
7 %7%
bonds payable on January 1,
20162016.
JeffersonJefferson
pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line
amortization method. The company can issue its bonds payable under various conditions.
Read the
requirements
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.
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Requirement 1. Journalize
Jefferson'sJefferson's
issuance of the bonds and first semiannual interest payment assuming the bonds were issued at face
value. Explanations are not required. (Record debits first, then credits. Exclude explanations from any
journal entries.)
Journalize the issuance of the bond payable at face value.
2016 Cash 100,000
Journalize the payment of semiannual interest when the bonds are issued at face value.
Jul. 1 Cash 3,500
issuance of the bonds and first semiannual interest payment assuming the bonds were issued at
9090.
Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal
entries.)
Journalize the issuance of the bond payable at
9090.
2016 Cash 90,000
Jan. 1 Discount on Bonds Payable 10,000
Journalize the payment of semiannual interest when the bonds are issued at
9090.
Jul. 1 Discount on Bonds Payable 500
Cash 3,500
issuance of the bonds and first semiannual interest payment assuming the bonds were issued at
109109.
Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal
entries.)
Journalize the issuance of the bond payable at
109109.
2016 Cash 109,000
Jan. 1 Premium on Bonds Payable 9,000
Journalize the payment of semiannual interest when the bonds are issued at
109109.
Jul. 1 Premium on Bonds Payable 450
Cash 3,500
Requirement 4. Which bond price results in the most interest expense for
JeffersonJefferson?
Explain in detail.
The
discount price of 90
results in the most interest expense. The

discount
must be amortized over the life of the bond, resulting in interest expense
greater than
the amount of interest actually paid.
On January 1,
20162016,
MichealMicheal
Unlimited issues
1010%,
2020-year
bonds payable with a face value of
$ 180 comma 000$180,000.
The bonds are issued at
102102
and pay interest on June 30 and December 31.
Requirements
1. Journalize the issuance of the bonds on January 1,
20162016.
2. Journalize the semiannual interest payment and amortization of bond premium on June 30,
20162016.
3. Journalize the semiannual interest payment and amortization of bond premium on December 31,
20162016.
4. Journalize the retirement of the bond at maturity. (Give the date.)
then credits. Select explanations on the last line of the journal entry.)
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Requirement 1. Journalize the issuance of the bonds on January 1,
20162016.
2016 Cash 183,600
Jan. 1 Premium on Bonds Payable 3,600
Issued bonds at a premium.

Requirement 2. Journalize the semiannual interest payment and amortization of bond premium on June
30,
20162016.
Jun. 30 Premium on Bonds Payable 90
Cash 9,000

Requirement 3. Journalize the semiannual interest payment and amortization of bond premium on
December 31,
20162016.
Dec. 31 Premium on Bonds Payable 90
Cash 9,000

Requirement 4. Journalize the retirement of the bond at maturity. (Give the date.)
2036 Bonds Payable 180,000
Jan. 1 Cash 180,000
Retired bonds payable at maturity.
Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to
protect his personal assets in the event the restaurant is sued.
Requirements
1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?
2. What are some disadvantages of organizing as a corporation?
Requirement 1. Which advantage of incorporating is most applicable? What are other advantages of
organizing as a corporateentity?
First answer which advantage of incorporating is most applicable in protecting Bob's personal assets?
A.
There is a mutual agency among the stockholders.
B.
A corporation has continuous life.
C.
Corporations can raise more money to pay for government regulations.
D.
Stockholders have limited liability.
E.
The transfer of corporate ownership is easy.
What are other advantages of organizing as a corporate entity? (Select three that apply.)
A.
It does not allow stockholders to bind the business to a contract.
B.
All income and expenses are split evenly among the shareholders.
C.
Start-up costs are lower than other business forms.
D.
There is no mutual agency among the stockholders and the corporation.
E.
A corporation has continuous life.
F.
The corporation is taxed separately from the shareholders.
G.
A majority vote is all that is required for any business decision.
Requirement 2. What are some disadvantages of organizing as a corporation? (Select three that apply.)
A.
Ownership and management are often separated.
B.
Earnings of the corporation are subject to double taxation.
C.
Corporations can raise more money than a proprietorship or partnership.
D.
Start-up costs are higher than other business forms.
E.
The transfer of corporate ownership is easy.
F.
Stockholders have limited liability.
G.
It has an indefinite life.
Corporation has two classes of stock: common,

$11
par value; and preferred,
$2020
par value.
Requirements
1. Journalize
MaineMaine's
issuance of
2 comma 0002,000
shares of common stock for
$ 5$5
per share.
2. Journalize
MaineMaine's
issuance of
2 comma 0002,000
shares of preferred stock for a total of
$ 40 comma 000$40,000.
Review Only
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MaineMaine's
issuance of
2 comma 0002,000
shares of common stock for
$ 5$5
per share. (Record debits first, then credits. Select the explanation on the last line of the journal entry
table.)
Cash 10,000
Common Stock—$1 Par Value 2,000
Paid-In Capital in Excess of Par—Common 8,000
Issued common stock at a premium.

MaineMaine's
issuance of
2 comma 0002,000
shares of preferred stock for a total of
$ 40 comma 000$40,000.
Cash 40,000
Preferred Stock—$20 Par Value 40,000
Issued preferred stock at par.
WestonWeston
Corporation issued
5 comma 5005,500
shares of no-par common stock for
$33
per share on
AugustAugust
13. Record the stock issuance. (Record debits first, then credits. Select the explanation on the last line of
the journal entry table.)
Review Only
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Aug. 13 Cash 16,500
Common Stock—No Par Value 16,500
Issued no-par common stock.
Corporation issued
7 comma 0007,000
shares of
$11
stated value common stock for
$1010
per share on
JulyJuly
7. Record the stock issuance. (Record debits first, then credits. Select the explanation on the last line of
the journal entry table.)
Review Only
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Jul. 7 Cash 70,000
Common Stock—$1 Stated Value 7,000
Paid-In Capital in Excess of Stated—Common 63,000
Issued common stock at a premium.
CedarCedar
Corporation issued
32 comma 00032,000
shares of
$22
par value common stock in exchange for a building with a market value of
$ 150 comma 000$150,000.
Record the stock issuance. (Record debits first, then credits. Select the explanation on the last line of the
journal entry table.)
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Building 150,000
Issued common stock in exchange for a building.
Cheap QualityCheap Quality

Furniture, Inc. completed the following treasury stock transactions in
20162016:
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(Click
Requirements
1. Journalize these transactions. Explanations are not required.
2. How will
Furniture, Inc. report treasury stock on its balance sheet as of
DecemberDecember
31,
20162016?
Review Only
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Requirement 1. Journalize these transactions. (Record debits first, then credits. Exclude explanations
from any journalentries.)
Dec.Dec.
1: Purchased
1 comma 3001,300
shares of the company's $1 par value common stock as treasury stock, paying cash of
$ 8$8
per share.
Dec. 1 Treasury Stock—Common 10,400
Cash 10,400
Dec.Dec.
15: Sold
200200
shares of the treasury stock for cash of
$ 11$11
per share.
Dec. 15 Cash 2,200
Treasury Stock—Common 1,600
Paid-In Capital from Treasury Stock Transactions 600
Dec.Dec.
20: Sold
800800
shares of the treasury stock for cash of
$ 4$4
per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on
DecemberDecember
20 is
$ 2 comma 000$2,000.)
Dec. 20 Cash 3,200
Paid-In Capital from Treasury Stock Transactions 2,000
Retained Earnings 1,200
Requirement 2. How will
Furniture, Inc. report treasury stock on its balance sheet as of
DecemberDecember
31,
20162016?
Furniture, Inc. will report treasury stock
beneath retained earnings
on the balance sheet as

a reduction
to total stockholders' equity.
FrenchvanillaFrenchvanilla
Company earned net income of
$ 102 comma 000$102,000
during the year ended
DecemberDecember
31,
20162016.
On
DecemberDecember
15,
declared the annual cash dividend on its
33%
preferred stock (par value,
$ 130 comma 000$130,000)
and a
$0.500.50
per share cash dividend on its common stock
left parenthesis 48 comma 000(48,000
shares).
then paid the dividends on
JanuaryJanuary
4,
20172017.
Requirements
1. Journalize for
the entry declaring the cash dividends on
DecemberDecember
15,
20162016.
2. Journalize for
the entry paying the cash dividends on
JanuaryJanuary
4,
20172017.
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Requirement 1. Journalize for
the entry declaring the cash dividends on
DecemberDecember
15,
20162016.
(Record debitsfirst, then credits. Select the explanation on the last line of the journal entry table.)
2016 Cash Dividends 27,900
Dec. 15 Dividends Payable—Preferred 3,900
Dividends Payable—Common 24,000
Declared a cash dividend.
Requirement 2. Journalize for
the entry paying the cash dividends on
JanuaryJanuary
4,
20172017.
2017 Dividends Payable—Preferred 3,900
Jan. 4 Dividends Payable—Common 24,000
Cash 27,900
Payment of cash dividend.
Precious MetalPrecious Metal

Trust has the following classes of stock:
LOADING...
(Click
the icon to view the data.)
Requirements
1. Precious MetalPrecious Metal
declares cash dividends of
$ 25 comma 000$25,000
for
20162016.
How much of the dividends goes to preferred stockholders? How much goes to common stockholders?
2. Assume the preferred stock is cumulative and
passed the preferred dividend in
20142014
and
20152015.
In
20162016,
the company declares cash dividends of
$ 28 comma 000$28,000.
How much of the dividend goes to preferred stockholders? How much goes to common stockholders?
3. Assume the preferred stock is noncumulative and
20142014
and
20152015.
In
20162016,
$ 28 comma 000$28,000.
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Requirement 1.
declares cash dividends of
$ 25 comma 000$25,000
for
20162016.
How much of the dividends goes to preferredstockholders? How much goes to common stockholders?
(Complete all input boxes. Enter "0" for any zero amounts.)
Precious MetalPrecious Metal's
dividend would be divided between preferred and common stockholders in this manner:
Total Dividend $25,000
Dividend to preferred stockholders:
Dividend in arrears $0
Current year dividend 4,500
Total dividend to preferred stockholders (4,500)
Dividend to common stockholders $20,500
Requirement 2. Assume the preferred stock is cumulative and
20142014
and
20152015.
In
20162016,
$ 28 comma 000$28,000.
Dividend in arrears $9,000
Requirement 3. Assume the preferred stock is noncumulative and
20142014
and
20152015.
In
20162016,
$ 28 comma 000$28,000.
SpahrSpahr,
Inc. had beginning retained earnings of
$ 140 comma 000$140,000
on
JanuaryJanuary
1,
20162016.
During the year,
SpahrSpahr
declared and paid
$ 60 comma 000$60,000
of cash dividends and earned
$ 75 comma 000$75,000
of net income. Prepare a statement of retained earnings for
SpahrSpahr,
Inc. for the year ending
DecemberDecember
31,
20162016.
Enter any increases in retained earnings prior to the subtotal and any decreases to retained earnings
below the subtotal. (Enter decreases in Retained Earnings with a minus sign or parentheses.)
Spahr, Inc.
Statement of Retained Earnings
Year Ended December 31, 2016
Retained Earnings, January 1, 2016 $140,000
Net income for the year 75,000
215,000
Dividends declared (60,000)
Retained Earnings, December 31, 2016 $155,000
RARRAR
Corporation had net income for
20162016
of
$ 60 comma 450$60,450.
RARRAR
had
15 comma 50015,500
shares of common stock outstanding at the beginning of the year and
20 comma 10020,100
shares of common stock outstanding as of December 31,
20162016.
During the year,
RARRAR
declared and paid preferred dividends of
$ 2 comma 600$2,600.
Compute
RARRAR's
earnings per share.
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Select the formula, then enter the amounts to calculate
RARRAR
Corporation's earnings per share as of December 31,
20162016.
(Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares. Round
earnings per share to the nearest cent.)
Ave. # common shrs Earnings per
( Net income - Preferred dividends ) / OS = share
( $60,450 - $2,600 ) / 17,800 = $3.25
BIMBIM
Corporation had net income for
20162016
of
$ 60 comma 450$60,450.
BIMBIM
had
15 comma 50015,500
shares of common stock outstanding at the beginning of the year and
20 comma 10020,100
shares of common stock outstanding as of December 31,
20162016.
During the year,
BIMBIM
declared and paid preferred dividends of
$ 2 comma 600$2,600.
Therefore,
BIMBIM's
earnings per share for
20162016
is
$ 3.25$3.25.
Assume the market price of
BIMBIM's
common stock is
$ 13$13
per share. Compute
BIMBIM's
price/earnings ratio.
Select the formula, then enter the amounts to calculate the company's price/earnings ratio as of
December 31,
20162016.
(Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares. Round
the ratio to two decimal places.)
Market price per share / Earnings per share = Price/earnings ratio
$13 / $3.25 = 4.00
DoyleDoyle,
Inc.'s
20162016
balance sheet reported the following
itemslong dash—with
20152015
figures given for comparison:
LOADING...
(Click
the icon to view the
20162016
and
20152015
figures.)
Net income for
20162016
was
$ 3 comma 520$3,520.
Compute
DoyleDoyle's
rate of return on common stockholders' equity for
20162016.
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Select the formula, then enter the amounts to calculate the company's rate of return on common
stockholders' equity for
20162016.
(Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares.
Complete all input boxes. Enter "0" for any zero amounts.)
Rate of return on
( Net income - Preferred dividends ) / Ave. common SE = common SE
( $3,520 - $0 ) / $22,000 = 16 %
Which characteristic of a corporation is a disadvantage?

A.
Limited liability
B.
Mutual agency
C.
Double taxation
D.
None are disadvantages.
The two basic sources of stockholders' equity are

A.
assets and equity.
B.
paid-in capital and retained earnings.
C.
retained earnings and dividends.
D.
preferred and common.
Suppose
Home Decor ImportsHome Decor Imports
issued
350 comma 000350,000
shares of
$0.040.04
par common stock at
$ 4$4
per share. Which journal entry correctly records the issuance of this stock?
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A.
Common Stock—$0.04 Par Value 1,400,000
Cash 1,400,000
B.
Cash 14,000
Paid-In Capital in Excess of Par-Common 1,386,000
C.
Cash 1,400,000
Common Stock—$0.04 Par Value 14,000
Paid-In Capital in Excess of Par-Common 1,386,000
D.
Cash 1,400,000
Suppose Yummy Treats Bakery issues common stock in exchange for a building. Yummy Treats Bakery
should record the building at
A.
its book value.
B.
its market value.
C.
a value assigned by the board of directors.
D.
the par value of the stock given.
A company's own stock that it has issued and repurchased is called

A.
issued stock.
B.
dividend stock.
C.
outstanding stock.
D.
treasury stock.
Assume that a company paid

$ 12$12
per share to purchase
1 comma 1001,100
shares of its
$ 4$4
par common stock as treasury stock. The purchase of treasury stock
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A.
increased total equity by
$ 13 comma 200$13,200.
B.
decreased total equity by
$ 13 comma 200$13,200.
C.
increased total equity by
$ 4 comma 400$4,400.
D.
decreased total equity by
$ 4 comma 400$4,400.
AlabashAlabash
Corporation has
9 comma 0009,000
shares of
77%,
$ 15$15
par cumulative preferred stock and
50 comma 00050,000
shares of common stock outstanding.
AlabashAlabash
declared no dividends in
20152015
and had no dividends in arrears prior to
20152015.
In
20162016,
AlabashAlabash
declares a total dividend of
$ 49 comma 000$49,000.
How much of the dividends go to the common stockholders?
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A.
$ 30 comma 100$30,100
B.
$ 49 comma 000$49,000
C.
$ 39 comma 550$39,550
D.
None; it all goes to preferred stockholders.
WilliamWilliam
Health Foods has
9 comma 0009,000
shares of
$ 3$3
par common stock outstanding, which were issued at
$ 13$13
per share.
WilliamWilliam
also has a deficit balance in Retained Earnings of
$ 82 comma 000$82,000.
How much is
WilliamWilliam's
total stockholders' equity?
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A.
$ 27 comma 000$27,000
B.
$ 35 comma 000$35,000
C.
$ 117 comma 000$117,000
D.
$ 199 comma 000$199,000
WoodlandWoodland
Corporation has the following data:
Net income $16,900
Preferred dividends 12,000
Average common stockholders'
equity 98,000
WoodlandWoodland's
rate of return on common stockholders' equity is
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A.
55%
B.
2929%
C.
1717%
D.
7171%
Following is a list of advantages and disadvantages of the corporate form of business. Identify each
quality as either an advantage or a disadvantage.
a. Ownership and management are separated. Disadvantage
b. Entity has continuous life. Advantage
c. Transfer of ownership is easy. Advantage
d. Stockholders' liability is limited. Advantage
e. Exposure to double taxation is evident. Disadvantage
Entity can raise more money than a partnership or sole
f. proprietorship. Advantage
g. Government regulation is expensive. Disadvantage
StanleyStanley
Systems completed the following stock issuance transactions:
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(Click
Requirements
1. Journalize the transactions. Explanations are not required.
2. How much paid-in capital did these transactions generate for
StanleyStanley
Systems?
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Requirement 1. Journalize the transactions. Explanations are not required. (Record debits first, then
credits. Exclude explanations from any journal entries.)
MayMay
19: Issued
1 comma 6001,600
shares of
$22
par value common stock for cash of
$9.009.00
per share.
May 19 Cash 14,400
Jun.Jun.
3: Issued
260260
shares of
$33,
no-par preferred stock for
$13 comma 00013,000
cash.
Jun. 3 Cash 13,000
Preferred Stock—No Par Value 13,000
Jun.Jun.
11: Received equipment with a market value of
$ 72 comma 000$72,000
in exchange for
6 comma 0006,000
shares of the
$22
par value common stock.
Jun. 11 Equipment 72,000
Requirement 2. How much paid-in capital did these transactions generate for
StanleyStanley
Systems?
Total paid-in capital generated from these transactions
amounts to $ 99,400 .
MatesMates
Corp. issued
3 comma 0003,000
shares of no-par common stock for
$ 8$8
per share.
Read the
requirements
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.
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Requirement 1a. Record issuance of the stock if the stock is true no-par stock. (Record debits first, then
a. Cash 24,000
Common Stock—No Par Value 24,000
Issued no-par stock.

Requirement 1b. Record issuance of the stock if the stock has stated value of
$33
per share. (Record debits first, then credits. Select the explanation on the last line of the journal entry
table.)
b. Cash 24,000
Common Stock—$3 Stated Value 9,000
Paid-In Capital in Excess of Stated Value—Common 15,000
Issued $3 stated value common stock.
Requirement 2. Which type of stock issuance results in more total paid-in capital?
Both result in the same amount of paid-in capital.
The charter for

KCAS minus TVKCAS−TV,
Inc. authorizes the company to issue 100,000 shares of
$22,
no-par preferred stock and500,000 shares of common stock with $1 par value. During its start-up phase,
KCASKCAS
completed the following transactions:
LOADING...
(Click
on the icon to view the transactions)
Requirements
1. Record the transactions in the general journal.
2. Prepare the stockholders' equity section of the
KCAS minus TVKCAS−TV
balance sheet at
SeptemberSeptember
3030,
20162016,
assuming
Inc. had net income of
$ 38 comma 000$38,000
for the month.
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Requirement 1. Record the transactions in the general journal. (Record debits first, then credits. Select
Sep.Sep.
6: Issued
525525
shares of common stock to the promoters who organized the corporation, receiving cash of
$15 comma 75015,750.
Sep. 6 Cash 15,750
Common Stock—$1 Par Value 525
Issued common stock for cash.

Sep.Sep.
12: Issued
550550
shares of preferred stock for cash of
$30 comma 00030,000.
Sep. 12 Cash 30,000
Preferred Stock—No Par Value 30,000
Issued preferred stock for cash.

Sep.Sep.
14: Issued
1 comma 7001,700
shares of common stock in exchange for land with a market value of
$20 comma 00020,000.
Sep. 14 Land 20,000
Issued common stock for land.

Requirement 2. Prepare the stockholders' equity section of the
KCAS minus TVKCAS−TV
balance sheet at
SeptemberSeptember
3030,
20162016,
assuming
Inc. had net income of
$ 38 comma 000$38,000
for the month.
KCAS-TV, Inc.
Balance Sheet (Partial)
September 30, 2016
Stockholders' Equity
Paid-In Capital:
Preferred Stock—$2, No-Par Value; 100,000 shares authorized,
550 shares issued and outstanding $30,000
Common Stock—$1 Par Value; 500,000 shares authorized,
2,225 shares issued and outstanding 2,225
Total Paid-In Capital 65,750
Total Stockholders' Equity $103,750
The charter of
MagnoliaMagnolia
Corporation authorizes the issuance of
900900
shares of preferred stock and
3 comma 0003,000
shares of common stock. During a two-month period,
MagnoliaMagnolia
completed these stock-issuance transactions:
LOADING...
(Click
Requirements
1. Record the transactions in the general journal.
2. Prepare the stockholders' equity section of the
MagnoliaMagnolia
balance sheet as of
AprilApril
3030,
20162016,
for the transactions given in this exercise. Retained Earnings has a balance of
$ 77 comma 000$77,000
at
AprilApril
3030,
20162016.
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Requirement 1. Record the transactions in the general journal. (Record debits first, then credits. Select
Mar.Mar.
23: Issued
260260
shares of
$44
par value common stock for cash of
$ 19$19
per share.
Mar. 23 Cash 4,940

Apr.Apr.
12: Received inventory with a market value of
$ 24 comma 000$24,000
and equipment with a market value of
$ 18 comma 000$18,000
for
330330
shares of the
$44
par value common stock.
Apr. 12 Inventory 24,000
Equipment 18,000
Issued common stock for inventory and equipment.
Apr.Apr.
17: Issued
900900
shares of
6 %6%,
$5050
par value preferred stock for
$5050
per share.
Apr. 17 Cash 45,000
Preferred Stock—$50 Par Value 45,000
Issued preferred stock for cash.

Requirement 2. Prepare the stockholders' equity section of the
MagnoliaMagnolia
balance sheet as of
AprilApril
3030,
20162016,
for the transactions given in this exercise. Retained Earnings has a balance of
$ 77 comma 000$77,000
at
AprilApril
3030,
20162016.
Magnolia Corporation
April 30, 2016
Paid-In Capital:
Preferred Stock—6%, $50 Par Value;
900 shares authorized, issued, and outstanding $45,000
Common Stock—$4 Par Value;
3,000 shares authorized, 590 shares issued and outstanding 2,360
WesternWestern
Amusements Corporation had the following stockholders' equity on
NovemberNovember
3030:
LOADING...
(Click
the icon to view the stockholders' equity.)
On December 30,
WesternWestern
purchased
250250
shares of treasury stock at
$ 15$15
per share.
Requirements
1. Journalize the purchase of the treasury stock.
2. Prepare the stockholders' equity section of the balance sheet at December 31,
20162016.
Assume the balance in retained earnings is unchanged from
NovemberNovember
3030.
3. How many shares of common stock are outstanding after the purchase of treasury stock?
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Requirement 1. Journalize the purchase of the treasury stock. (Record debits first, then credits. Select
Dec. 30 Treasury Stock—Common 3,750
Cash 3,750
Purchased treasury stock.

Requirement 2. Prepare the stockholders' equity section of the balance sheet at December 31,
20162016.
Assume the balance in retained earnings is unchanged from
NovemberNovember
3030.
Western Amusements Corporation
December 31
Paid-In Capital:
Common Stock—$5 Par Value;
1,300 shares authorized,
280 shares issued, 30 shares outstanding $1,400
Treasury Stock—Common; 250 shares at cost (3,750)
Requirement 3. How many shares of common stock are outstanding after the purchase of treasury
stock?
30 30
shares are outstanding.
Stock transactions for
CarefulCareful
Driving School, Inc. follow:
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(Click
Journalize the transactions. (Record debits first, then credits. Select the explanation on the last line of the
journal entrytable.)
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Mar.Mar.
4: Issued
23 comma 00023,000
shares of $1 par value common stock at
$ 14$14
per share.
Mar. 4 Cash 322,000

MayMay
22: Purchased
900900
shares of treasury
stocklong dash—common
at
$ 16$16
per share.
May 22 Treasury Stock—Common 14,400
Cash 14,400
Purchased treasury stock.

Sep.Sep.
22: Sold
400400
shares of treasury
at
$ 25$25
per share.
Sep. 22 Cash 10,000
Sold treasury stock above cost.

Oct.Oct.
14: Sold
500500
shares of treasury
at
$ 9$9
per share.
Oct. 14 Cash 4,500
Sold treasury stock below cost.
HorizonHorizon
Communications has the following stockholders' equity on
DecemberDecember
3131,
20162016:
LOADING...
(Click
on the icon to view the stockholders' equity)
Requirements
1. Assuming the preferred stock is cumulative, compute the amount of dividends to preferred stockholders and to
common stockholders for
20162016
and
20172017
if total dividends are
$ 7 comma 680$7,680
in
20162016
and
$ 49 comma 000$49,000
in
20172017.
Assume no changes in preferred stock and common stock in
20172017.
2. Record the journal entries for
20162016,
assuming that
HorizonHorizon
Communications declared the dividend on December 1 for stockholders of record on December 10.
HorizonHorizon
Communications paid the dividend on December 20.
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Requirement 1. Assuming the preferred stock is cumulative, compute the amount of dividends to
preferred stockholders and to common stockholders for
20162016
and
20172017
$ 7 comma 680$7,680
in
20162016
and
$ 49 comma 000$49,000
in
20172017.
Assume no changes in preferred stock and common stock in
20172017.
(Assume all preferred dividends have been paid prior to
20162016.
Complete all input boxes. Enter a "0" for zero amounts. For the current year preferred dividend, be sure to
enter the calculated dividend on the "current year dividend" line and the paid out dividend on the "total
dividend to preferredstockholders" line.)
HorizonHorizon's
20162016
Total Dividend—2016 $7,680
Dividend to common stockholders $0
HorizonHorizon's
20172017
Dividend in arrears $2,000
Requirement 2. Record the journal entries for
20162016,
assuming that
HorizonHorizon
Communications declared the dividend on December 1 for stockholders of record on December 10.
HorizonHorizon
Communications paid the dividend on December 20. (Record debits first, then credits. Select the
explanation on the last line of the journal entry table. If no entry is required, select "No entry required" on
the first line of the Accounts and Explanation column and leave the remaining cells blank.)
Dec. 1,
20162016:
Declared dividend.
Dec. 1 Cash Dividends 7,680
Dividends Payable—Preferred 7,680

Dec. 10,
20162016:
Date of record.
Dec. 10 No entry required
Dec. 20,
20162016:
Paid dividend.
Dec. 20 Dividends Payable—Preferred 7,680
Cash 7,680
The following elements of stockholders' equity are from the balance sheet of
SacchettiSacchetti
Marketing Corp. at
DecemberDecember
3131,
20152015:
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(Click
on the icon to view the data.)
SacchettiSacchetti
paid no preferred dividends in
20152015.
Requirements
1. Compute the dividends to the preferred and common shareholders for
20162016
$ 155 comma 000$155,000
and assuming the preferred stock is noncumulative.
2. Record the journal entries for
20162016
assuming that
SacchettiSacchetti
Marketing Corp. declared the dividends on
JulyJuly
1 for stockholders of record on
JulyJuly
15.
SacchettiSacchetti
paid the dividends on
JulyJuly
31.
Review Only
LOADING...

Requirement 1. Compute the dividends to the preferred and common shareholders for
20162016
$ 155 comma 000$155,000
and assuming the preferred stock is noncumulative. (Complete all input boxes. Enter "0" for any zero
amounts.)
SacchettiSacchetti's
20162016
Requirement 2. Record the journal entries for
20162016
assuming that
SacchettiSacchetti
Marketing Corp. declared the dividends on
JulyJuly
1 for stockholders of record on
JulyJuly
15.
SacchettiSacchetti
paid the dividends on
JulyJuly
31. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. If no
entry is required, select "No entry required" on the first line of the Accounts and Explanation column and
leave the remaining cells blank.)
Jul.Jul.
1,
20162016:
Declared dividend.
Jul. 1 Cash Dividends 155,000
Dividends Payable—Preferred 4,500

Jul.Jul.
15,
20162016:
Date of record.
Jul. 15 No entry required
Jul.Jul.
31,
20162016:
Paid dividend.
Jul. 31 Dividends Payable—Preferred 4,500
Cash 155,000
Cash flow items must be categorized into one of four categories. Identify each item as operating (O),
investing (I), financing (F), or non-cash (N).
a. Cash purchase of merchandise inventory O
b. Cash payment of dividends F
Cash receipt from the collection of long-term notes
c. receivable I
d. Cash payment for income taxes O
e. Purchase of equipment in exchange for notes payable N
f. Cash receipt from the sale of land I
g. Cash received from borrowing money F
h. Cash receipt for interest income O
i. Cash receipt from the issuance of common stock F
j. Cash payment of salaries O
Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the
following items for you to consider in preparing the statement:
LOADING...
(Click
the icon to view the items.)
Identify each item as a(n):
bullet•
Operating
activitylong dash—addition
to net income (O+) or subtraction from net income
(Ominus−)
bullet•
Investing
activitylong dash—cash
inflow (I+) or cash outflow
(Iminus−)
bullet•
Financing
activitylong dash—cash
inflow (F+) or cash outflow
(Fminus−)
bullet•
Activity that is not used to prepare the indirect statement of cash flows (N)
O+ a. Increase in accounts payable
F– b. Payment of dividends
O– c. Decrease in accrued liabilities
F+ d. Issuance of common stock
O– e. Gain on sale of building
O+ f. Loss on sale of land
O+ g. Depreciation expense
O– h. Increase in merchandise inventory
O+ i. Decrease in accounts receivable
I– j. Purchase of equipment
OMDOMD
Equipment, Inc. reported the following data for
20162016:
LOADING...
(Click
Compute
OMD'sOMD's
net cash provided by operating
activitieslong dash—indirect
method.
Complete the partial Statement of Cash Flows. (Use parentheses or a minus sign for numbers to be
subtracted.)
OMD Equipment, Inc.
Statement of Cash Flows (Partial)
Cash Flows from Operating Activities:
Net Income $43,000
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation Expense $7,000
Increase in Accounts Receivable (7,000)
Decrease in Accounts Payable (3,000) (3,000)
Net Cash Provided by (Used for) Operating
Activities $40,000
Two WayTwo Way

Cellular accountants have assembled the following data for the year ended
AprilApril
30,
20162016:
LOADING...
(Click
Prepare the operating activities section using the indirect method for
Two WayTwo Way
Cellular's statement of cash flows for the year ended
AprilApril
30,
20162016.
(Use parentheses or a minus sign for numbers to be subtracted.)
Two Way Cellular
Statement of Cash Flows (Partial)
Year Ended April 30, 2016
Net Income $60,000
Increase in Current Assets Other than Cash (24,000)
Decrease in Current Liabilities (17,000) (21,000)
Net Cash Provided by (Used for) Operating
Activities 39,000
LanewayLaneway
Cellular accountants have assembled the following data for the year ended
JuneJune
30,
20162016:
LOADING...
(Click
Prepare
LanewayLaneway
Cellular's statement of cash flows using the indirect method for the year ended
JuneJune
30,
20162016.
Assume beginning and ending Cash are
$ 43 comma 000$43,000
and
$ 77 comma 300$77,300,
respectively.
Complete the statement one section at a time, beginning with the cash flows from operating activities.
(Use parentheses or a minus sign for numbers to be subtracted. If a box is not used in the statement,
leave the box empty; do not select a label or enter a zero.)
Laneway Cellular
Statement of Cash Flows
Year Ended June 30, 2016
Net Income $30,000
Increase in Current Assets Other than Cash (11,000)
Decrease in Current Liabilities (6,000)
(11,000)
Net Cash Provided by (Used for) Operating Activities 19,000
Cash Flows from Investing Activities:
Purchase of Equipment $(34,000)
Cash Receipt from Sale of Land 27,000
Net Cash Provided by (Used for) Investing Activities (7,000)
Cash Flows from Financing Activities:
Cash Receipt from Issuance of Common Stock $28,000
Payment of Cash Dividends (5,700)
Net Cash Provided by (Used for) Financing Activities 22,300

Net Increase (Decrease) in Cash 34,300
Cash Balance, June 30, 2015 43,000
Cash Balance, June 30, 2016 $77,300
RootRoot
Media Corporation had the following income statement and balance sheet for
20162016:
LOADING...
(Click
the icon to view the income statement.)
LOADING...
(Click
the icon to view the balance sheet.)
Requirements
1. Compute the acquisition of plant assets for
RootRoot
Media Corporation during
20162016.
The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant
assets.
2. Compute the payment of a long-term note payable. During the year, the business issued a
$ 5 comma 200$5,200
note payable.
Review Only
LOADING...

Requirement 1. Compute the acquisition of plant assets for
RootRoot
Media Corporation during
20162016.
The business sold no plant assets during the year. Assume the company paid cash for the acquisition of
plant assets.
The acquisition of equipment is
$ 19100 19100.
Requirement 2. Compute the payment of a long-term note payable. During the year, the business issued
a
$ 5 comma 200$5,200
note payable.
The payment of a long-term note payable is
$ 6200 6200.
PrestonPreston
Media Corporation had the following income statement and balance sheet for
20162016:
LOADING...
(Click
the icon to view the income statement.)
LOADING...
(Click
the icon to view the balance sheet.)
During the year
PrestonPreston
issued a
$ 5 comma 100$5,100
note payable.
PrestonPreston
acquired equipment worth
$ 15 comma 000$15,000,
and made payments on the long-term notes payable in the amount of
$ 7 comma 100$7,100
during the year. Assume the company paid cash for the acquisition of plant assets.
Prepare
PrestonPreston
Media's statement of cash
flowslong dash—indirect
methodlong dash—for
the year ended December 31,
20162016.
Review Only
LOADING...

Complete the statement one section at a time, beginning with the cash flows from operating activities.
(Use parentheses or a minus sign for numbers to be subtracted. If a box is not used in the statement,
leave the box empty; do not select a label or enter a zero.)
Preston Media Corporation
Statement of Cash Flows
Net Income $30,000
Depreciation Expense $0
Increase in Accounts Receivable (700)
Increase in Accounts Payable 2,400
1,700
Net Cash Provided by (Used for) Operating Activities 31,700
Cash Flows from Investing Activities:
Acquisition of Equipment (15,000)
Net Cash Provided by (Used for) Investing Activities (15,000)

Cash Flows from Financing Activities:
Payment of Cash Dividends (19,500)
Payment of Note Payable (7,100)
Cash Receipt from Issuance of Note Payable 5,100
Cash Receipt from Issuance of Common Stock 5,000
Net Cash Provided by (Used for) Financing Activities (16,500)
Net Increase (Decrease) in Cash 200
Cash Balance, December 31, 2015 4,500
Cash Balance, December 31, 2016 $4,700
Martha's SuppersMartha's Suppers

earned net income of
$ 23 comma 000$23,000,
which included depreciation of
$ 13 comma 000$13,000.
Martha'sMartha's
acquired a
$ 119 comma 000$119,000
building by borrowing
$ 119 comma 000$119,000
on a long-term note payable.
Requirements
1. How much did
Martha'sMartha's
cash balance increase or decrease during the year?
2. Were there any non-cash transactions for the company? If so, show how they would be reported in the statement
of cash flows.
Requirement 1. How much did
Martha'sMartha's
cash balance increase or decrease during the year?
Complete the following table to calculate
Martha'sMartha's
cash balance, and indicate whether this balance represents an increase or a decrease in cash. (Enter a
"0" for any item(s) that do not affect cash.)
Net income $23,000
Depreciation Expense 13,000
Purchase of building with a long-term note 0
Increase in cash $36,000
Requirement 2. Were there any non-cash transactions for the company? If so, show how they would be
reported in the statement of cash flows.
Were there any non-cash transactions for the
company? Yes
Show how they would be reported in the statement of cash flows.
Acquisition of building with long-term note payable is reported in the non-cash investing and
financing activities.
ShaunaShauna
McLearyMcLeary
Company expects the following for
20162016:
times • Net cash provided by operating activities of
$ 148 comma 000$148,000.
times • Net cash provided by financing activities of
$ 54 comma 000$54,000.
times • Net cash used for investing activities of
$ 75 comma 000$75,000
(no sales of long-term assets).
times • Cash dividends paid to stockholders of
$ 7 comma 000$7,000.
How much free cash flow does
McLearyMcLeary
expect for
20162016?
Select the labels and enter the amounts to calculate the expected free cash flow for
20162016.
(Abbreviations used: Cash pmts for planned invest. = Cash payments for planned investments; NCOA =
Net cash provided by operating activities; NCFA = Net cash provided by financing activities.)
Cash pmts for planned Payment of cash Free cash
NCOA -. invest. - dividends = flow
$148,000 - $75,000 - $7,000 = $66,000

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AltonAlton

Clothing purchased land, paying

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To record purchase of land with cash and note payable.

Concord Pet Care ClinicConcord Pet Care Clinic

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Date Accounts and Explanation Debit Credit

At the beginning of the year,

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To record depreciation on equipment.

Discarded fully depreciated equipment.

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Discarded equipment with a book value.

Apex CommunicationApex Communication

Pacific PetroleumPacific Petroleum

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is the method used to compute depletion.

Smith's AutoSmith's Auto

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Exchanged old computer equipment and cash for new computer

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Exchanged old equipment and cash for new equipment.

Which cost is not recorded as part of the cost of a building?

How should you record a capital expenditure?

A copy machine cost

Which method is used to compute depletion?

asset turnover ratio?

method tracks wear and tear most closely.

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To record depreciation on building.

To record depreciation on building.

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To record depreciation on fixtures.

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To record depreciation on fixtures.

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To record purchase of mineral rights.

To record payment of costs associated with purchase of

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Received cash in exchange for a note.

Paid principal and interest payment.

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Issued bonds at face value.

Paid semiannual interest.

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Issued bonds at a discount.

Paid semiannual interest and amortized

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Issued bonds at a premium.

Paid semiannual interest and amortized premium.

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Issued bonds payable.

Retired bonds payable at maturity.

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A bond that matures in installments at regular intervals is a

Nick SpanosNick Spanos

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Welch CorporationWelch Corporation's