UNIVERSITA BOCCONI

Department of Accounting

Accounting and Financial Statement Analysis

30005

REVIEW SESSION N4

CHAPTER 10
Exercise1
On March 1, 2010, Halbur Corporation, issued $500,000 of 8%, five-year bonds at par. The bonds
were dated March 1, 2010, and the first annual interest payment will be on February 28, 2011. The
accounting period ends December 31. Assuming no adjusting entries have been made during the
year.
Complete the journal entry grid for each of the following dates (round to the nearest dollar):
Accounts
Cash
Bonds Payable
Interest Payable
Interest Expense

March 1, 2010
Debit
Credit

December 31, 2010

Debit
Credit

February 28, 2011

Debit
Credit

Exercise 2
On January 1, 2011, Schultz Corporation issued $100,000 of its ten-year, 6% bonds payable at
$98,000. The bonds were dated January 1, 2011, and interest is paid each December 31.
Requirements:
A. Give the entry for the sale of the bonds.
B. Give the entry to record the first interest payment. Assume straight-line amortization and
no adjusting journal entries were made during the year.

Exercise 3
On March 1, 2010, Jose, Inc. issued a $1,000, 8%, five-year bond for $1,060. The bond was dated
on March 1, 2010, and interest is payable each February 28. Jose, Inc. has a December 31 year-end.
Requirements:
a) Prepare the journal entry required on March 1, 2010.
b) Prepare the journal entry required on December 31, 2010. No adjusting journal entries were
made during the year.
c) Prepare the entry required on February 28, 2011.
d) Was the bond issued at par, at a premium, or at a discount?
e) What is the carrying value or book value of the bond on December 31, 2010?
f) Where in the financial statements does the carrying value of the bond appear? (Be specific).
g) On what date does the bond issue mature?

EXERCISES RECAP
Exercise 1

[CHAPTER 1]

National Shops, Inc. reported the following amounts on its balance sheet as of December 31, 2010:
Inventory

$325,000

Notes payable

100,000

Cash

150,000

Contributed capital

750,000

Net property, plant and equipment

600,000

Accounts receivable

30,000

Accounts payable
Retained earnings

45,000
?

Requirements:
1. What is the amount of National's total assets as of December 31, 2010?
2. Identify the items listed above that are liabilities.
3. What is the amount of National's retained earnings as of December 31, 2010?
4. Prepare a balance sheet for National as of December 31, 2010.
5. National wishes to purchase merchandise from your company on account. The amount of the
purchases would probably be about $10,000 per month, and the terms would require National to
make payment in full within 30 days. Would you recommend that your company grant credit to
National under these terms? Explain the reasoning for your response.

Exercise 2

[CHAPTER 2]

The accounts with identification letters for Ward Company are listed below.
(Letter & Account Title)
A Cash
B Accounts receivable
C Office supplies inventory
D Equipment
E Land
F Accounts payable
G Notes payable
H Contributed capital
I Retained earnings
During 2010, the company completed the transactions given below. You are to indicate the
appropriate journal entry for each transaction by giving the account letter and amount. Some
entries may need three letters. The first transaction is given as an example.

Transaction
A.
B.

C.
D.
E.
F.
G.

Borrowed $50,000 and signed

a note.
Purchased
equipment
for
$50,000. Paid $10,000 cash,
signed $40,000 note payable.
Collected $15,000 of accounts
receivable.
Paid $12,000 of accounts
payable.
Issued
capital
stock
in
exchange for $60,000 cash.
Purchased $5,000
office
supplies on credit.
Paid for the office supplies in
(F).

Debit
Letter
Amount
A

$50,000

Credit
Letter
Amount
G

$50,000

Exercise 3

[CHAPTER 3]

For the year ending December 31, 2010, the accounts of Jackson Corporation showed the following
balances:
Contributed capital, January 1, 2010
Retained earnings, beginning balance, January 1, 2010
Total revenues earned during 2010
Total expenses incurred during 2010
Total dividends declared during 2010
Issuance of stock during 2010

$500,000
$100,000
$150,000
$90,000
$10,000
$50,000

Requirement:
Determine the components of stockholders equity as of December 31, 2010.

Exercise 4

[CHAPTER 4]

For each of the following transactions, indicate the amounts and direction of effects of the
adjusting entry on the elements of the balance sheet and income statement.
Using the following format, indicate + for increase, and - for decrease, and NE for no
effect. Transactions:
A. Wages of $5,800 have been earned, but not paid to employees at the end of the year.
B. Supplies in the amount of $2,000 were used during the year, which are currently recorded in
the office supplies inventory account.
C. Interest has accrued on a bank loan.

Balance Sheet
Transaction

Assets

Liabilities

Stockholders
Equity

Income Statement
Revenues

Expenses

Net
Income

A.
B.
C.

Exercise 5

[CHAPTER 6]

On June 1, 2010, Concorde Company sold merchandise on credit at an invoice price of $1,000;
terms 2/10, n/30. Give the journal entries to record the following:
A. To record the sale.
B. Assumption A: To record collection on June 28, 2010.
C. Assumption B: To record collection on June 9, 2010.
Exercise 6

[CHAPTER 7]

William Company uses the periodic inventory system and has provided the following data:
Beginning inventory
Purchases
Sales

Units
6,000
32,000
28,000

Total Amount
$ 30,000
192,000
280,000

Requirement 1:
Calculate the following using both FIFO and LIFO inventory methods.
FIFO
A. Ending inventory
B. Cost of Goods Sold
C. Gross margin

$
$
$

LIFO
$
$
$

Requirement 2:
Conceptually, how does pretax income using FIFO (in times of rising prices)
compare to LIFO pretax income? Explain your answer.

Exercise 7

[CHAPTER 8]

Beckworth Company purchased a truck on January 1, 2009, at a cash cost of $10,600. The
estimated residual value was $400 and the estimated useful life 4 years. The company uses straightline depreciation computed monthly. On July 1, 2012, the company sold the truck for $1,900 cash.
A. What was the depreciation expense amount per month?
B. What was the amount of accumulated depreciation at July 1, 2012?
C. Give the required journal entries on the date of disposal, July 1, 2012. (Assume no 2012
depreciation had yet been recorded).

Exercise 8

[CHAPTER 9]

Border Company purchased a truck that cost $17,000. The company signed a $17,000 note payable
that specified four equal annual payments (at each year-end), each of which includes a payment on
the principal and interest on the unpaid balance at 10% per annum.
Requirements:
A. Calculate the amount of each equal payment (round to the nearest dollar).
B. Prepare the journal entry to record the purchase of the truck.
C. Prepare the journal entry to record the first annual payment on the note (assume no interest has
been accrued during the year).
D. Will the interest paid with the first annual payment be higher or lower than the interest paid
with the second annual payment? Explain your answer.