Acc Individual Accounting Principles Individual Assignment Week 3

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Individual Assignment week 3
Rose Breedlove Merced
ACC291 Accounting Principles II
May 23, 2012
Prof. David Vega

Individual Assignment week 3

Exercise E10-6
According to the accountant of Ulner Inc., its payroll taxes for the week were as follows: * $198.40 for FICA taxes,
* $19.84 for federal unemployment taxes,
* $133.92 for state unemployment taxes.
Instructions
Journalize the entry to record the accrual of the payroll taxes. Solution:
Payroll Tax Expense $352.16| FICA Taxes Payable $198.40| Federal Unemployment Taxes Payable $19.84| State Unemployment Taxes Payable $133.92|

Exercise E10-8
Jim Thom has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable.
2. When seeking long-term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected. 3. When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result. 4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds. 5. Secured bonds are also known as debenture bonds.

6. Bonds that mature in installments are called term bonds.
7. A conversion feature may be added to bonds to make them more attractive to bond buyers. 8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate. 9. Bond prices are usually quoted as a percentage of the face value of the bond. 10. The present value of a bond is the value at which it should sell in the marketplace. Instructions

Identify each statement above as true or false. If false, indicate how to correct the statement. Solutions:
1. True|
2. True|
3. False. There is significant tax savings in long-term financing when an organization issues bonds over common stock.| 4. True|
5. False. Bonds that are unsecure are also known a debenture | 6. False. These bonds because they mature over time or installments are known as “serial bonds”.| 7. True|
8. True|
9. True|
10 True|
|

Exercise E10-18
Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for $562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize bond premium or discount. Instructions

Prepare the journal entries to record the following. (Round to the nearest dollar.) (a) The issuance of the bonds.
(b) The payment of interest and the discount amortization on July 1, 2011, assuming that interest was not accrued on June 30. (c) The accrual of interest and the discount amortization on December 31, 2011. Solutions:

(a) Jan. 1 Cash ……………............................................................. $562,613| Discount on Bonds Payable…………….. ......................... $37,387| Bonds Payable................................................................................. $600,000| |

(b) July 1 Bond Interest Expense|
($562,613 X 5%) ....................................... $28,131| Discount on Bonds Payable................................................... $1,131| Cash ($600,000 X 9% X 1/2)……...................................... $27,000| |

(c) Dec. 31 Bond Interest Expense|
[($562,613 + $1,131) X 5%] .................................. $28,187| Discount on Bonds Payable........................................................ $1,187| Bond Interest Payable ..................... $27,000| For answers b & c see amortization of bond...
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