September 2023 1 On September 1 2008 Zelner Company reacquired 12 000 shares of its 10 par value common stock for

2024 A+ Answers Of The Following Questions Assignment Help

1 On September 1 2008 Zelner Company reacquired 12 000 shares of its 10 par value common stock for 2023

1. On September 1, 2008, Zelner Company reacquired 12,000 shares of its $10 par value common stock for $15 per share. Zelner uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit a. Treasury Stock for $120,000. b. Common Stock for $120,000. c. Common Stock for $120,000 and Paid-in Capital in Excess of Par for $60,000. d. Treasury Stock for $180,000. 2. An analysis of stockholders’ equity of Jinn Corporation as of January 1, 2007, is as follows: Common stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares $1,800,000 Paid-in capital in excess of par 900,000 Retained earnings 760,000 Total $3,460,000 Jinn uses the cost method of accounting for treasury stock and during 2007 entered into the following transactions: Acquired 2,500 shares of its stock for $75,000. Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury shares at $20 per share. Assuming no other equity transactions occurred during 2007, what should Jinn report at December 31, 2007, as total additional paid-in capital? a. $895,000 b. $900,000 c. $905,000 d. $915,000 3. Baden Corporation owned 20,000 shares of Terney Corporation’s $5 par value common stock. These shares were purchased in 2004 for $180,000. On September 15, 2008, Baden declared a property dividend of one share of Terney for every ten shares of Baden held by a stockholder. On that date, when the market price of Terney was $14 per share, there were 180,000 shares of Baden outstanding. What NET reduction in retained earnings would result from this property dividend? a. $90,000 b. $252,000 c. $72,000 d. $162,000 1. On June 30, 2007, when Vietti Co.’s stock was selling at $65 per share, its capital accounts were as follows: Capital stock (par value $50; 60,000 shares issued) $3,000,000 Premium on capital stock  600,000 Retained earnings 4,200,000 If a 100% stock dividend were declared and distributed, capital stock would be a. $3,000,000. b. $3,600,000. c. $6,000,000. d. $7,800,000. 2. On January 1, 2007, Golden Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $8, the corporation declared a 10% stock dividend to be issued to stockholders of record on December 16, 2007. What was the impact of the 10% stock dividend on the balance of the retained earnings account? a. $50,000 decrease b. $80,000 decrease c. $88,000 decrease d. No effect 3. On January 2, 2006, Carr Co. issued 10-year convertible bonds at 105. During 2008, these bonds were converted into common stock having an aggregate par value equal to the total face amount of the bonds. At conversion, the market price of Carr’s common stock was 50 percent above its par value. On January 2, 2006, cash proceeds from the issuance of the convertible bonds should be reported as a. paid-in capital for the entire proceeds. b. paid-in capital for the portion of the proceeds attributable to the conversion feature and as a liability for the balance. c. a liability for the face amount of the bonds and paid-in capital for the premium over the face amount. d. a liability for the entire proceeds. 1. On January 1, 2007, Doane Corp. granted an employee an option to purchase 6,000 shares of Doane’s $5 par value common stock at $20 per share. The Black-Scholes option pricing model determines total compensation expense to be $140,000. The option became exercisable on December 31, 2008, after the employee completed two years of service. The market prices of Doane’s stock were as follows: January 1, 2007 $30 December 31, 2008 50 For 2008, Doane should recognize compensation expense under the fair value method of a. $90,000. b. $30,000. c. $70,000. d. $0. 2. With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure? a. Common stock, preferred stock, and convertible securities outstanding in lots of even thousands b. Earnings derived from one primary line of business c. Ownership interest consisting solely of common stock d. None of these 3. In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)? a. Annual preferred dividend b. Annual preferred dividend times (one minus the income tax rate) c. Annual preferred dividend times the income tax rate d. Annual preferred dividend divided by the income tax rate 1. Antidilutive securities a. should be included in the computation of diluted earnings per share but not basic earnings per share. b. are those whose inclusion in earnings per share computations would cause basic earnings per share to exceed diluted earnings per share. c. include stock options and warrants whose exercise price is less than the average market price of common stock. d. should be ignored in all earnings per share calculations. 2. Jett Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,050,000 for the year ending December 31, 2007. Earnings per share of common stock for 2007 would be a. $1.75. b. $.83. c. $1.00. d. $1.17. 3. Discount on Notes Payable is charged to interest expense a. equally over the life of the note. b. only in the year the note is issued. c. using the effective-interest method. d. only in the year the note matures. PROBLEMS: 1. Warranties: James Equipment Company sells computers for $1,500 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2006, the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $30 for parts and $60 for labor. (Assume sales all occur at December 31, 2006.) In 2007, James incurred actual warranty costs relative to 2006 computer sales of $10,000 for parts and $18,000 for labor. Instructions (a) Under the expense warranty treatment, give the entries to reflect the above transactions (accrual method) for 2006 and 2007. (b) Under the cash basis method, what are the Warranty Expense balances for 2006 and 2007? (c) The transactions of part (a) create what balance under current liabilities in the 2006 balance sheet? 2. Contingent liabilities: Below are three independent situations. 1. In August, 2007 a worker was injured in the factory in an accident partially the result of his own negligence. The worker has sued Rooney Co. for $800,000. Counsel believes it is reasonably possible that the outcome of the suit will be unfavorable and that the settlement would cost the company from $250,000 to $500,000. 2. A suit for breach of contract seeking damages of $2,400,000 was filed by an author against Early Co. on October 4, 2007. Early’s legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the award to the plaintiff is between $600,000 and $1,800,000. No amount within this range is a better estimate of potential damages than any other amount. 3. Peete is involved in a pending court case. Peete’s lawyers believe it is probable that Peete will be awarded damages of $1,000,000. 3. Leases: Capital lease amortization and journal entries. Windom Co. as lessee records a capital lease of machinery on January 1, 2008. The seven annual lease payments of $350,000 are made at the end of each year. The present value of the lease payments at 10% is $1,704,000. Windom uses the effective-interest method of amortization and sum-of-the-years’-digits depreciation (no residual value). Instructions (Round to the nearest dollar.) a. Prepare an amortization table for 2008 and 2009. b. Prepare all of Windom ‘s journal entries for 2008. 4. Lessor accounting—direct-financing lease. Jenks, Inc. enters into a lease agreement as lessor on January 1, 2008, to lease an airplane to National Airlines. The term of the noncancelable lease is eight years and payments are required at the end of each year. The following information relates to this agreement: 1. National Airlines has the option to purchase the airplane for $9,000,000 when the lease expires at which time the fair value is expected to be $15,000,000. 2. The airplane has a cost of $38,000,000 to Jenks, an estimated useful life of fourteen years, and a salvage value of zero at the end of that time (due to technological obsolescence). 3. National Airlines will pay all executory costs related to the leased airplane. 4. Annual year-end lease payments of $5,766,425 allow Jenks to earn an 8% return on its investment. 5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by Jenks. Instructions What type of lease is this? Discuss. (b) Prepare a lease amortization schedule for the lessor for the first two years (2008-2009). (Round all amounts to nearest dollar.) (c) Prepare the journal entries on the books of the lessor to record the lease agreement, to reflect payments received under the lease, and to recognize income, for the years 2008 and 2009. 5. Bonds: Entries for bonds payable. Prepare journal entries to record the following transactions relating to long-term bonds of Grier, Inc. (Show computations.) (a) On June 1, 2006, Grier, Inc. issued $600,000, 6% bonds for $587,640, which includes accrued interest. Interest is payable semiannually on February 1 and August 1 with the bonds maturing on February 1, 2016. The bonds are callable at 102. (b) On August 1, 2006, Grier paid interest on the bonds and recorded amortization. Grier uses straight-line amortization. (c) On February 1, 2008, Grier paid interest and recorded amortization on all of the bonds, and purchased $360,000 of the bonds at the call price. Assume that a reversing entry was made on January 1, 2008.

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