1. Yellow Cab Co. began operations on January 2, 2010. It employs 15 drivers who work 8-hour days. Each employee earns 10 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $24.00 in 2010 and $25.50 in 2011. The average vacation days used by each driver in 2011 was 9. Yellow Cab Co. accrues the cost of compensated absences at rates of pay in effect when earned.

a.Prepare journal entries to record the transactions related to paid vacation days during 2010 and 2011.

2. XYZ Company is building a new baseball stadium at a cost of $3,000,000. It received a down payment of $500,000 from local businesses to support the project, and now needs to borrow $2,500,000 to complete the project. It therefore decides to issue $2,500,000 of 9%, 10-year bonds. These bonds were issued on January 1, 2010, and pay interest annually on each January 1, beginning 2011. The bonds yield 6%.

a. Prepare the journal entry to record the issuance of the bonds on January 1, 2010.

b.Prepare a bond amortization schedule up to and including January 1, 2015, using the effective-interest method. Assume that on July 1, 2014, XYZ Company retires a half of the bonds at a cost of $1,000,000.

c.Prepare the journal entry to record this retirement.