1. A machine cost $240,000, has annual depreciation of $40,000, and has accumulated depreciation of $180,000 on December 31, 2016. On January 1, 2017, when the machine has a fair value of $75,000, it is exchanged for a new machine with a fair value of $60,000 and $ 15,000 cash is received . The exchange lacked commercial substance.

Instructions

(a) Show the calculation of the gain to be recognized from the exchange. (2 marks)

(b) Prepare the entry for the exchange. (3 marks)

2. Havana Company has 100 employees who work 8-hour days and are paid hourly. On January 1, 2019, the company began a program of granting its employees 14 days of paid vacation each year. Vacation days earned in 2019 may first be taken on January 1, 2020. Information relative to these employees is as follows:

Hourly Vacation Days Earned Vacation Days Used

Year Wages by Each Employee by Each Employee

2019 $22 14 0

2020 24 14 10

Havana has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.

Instructions:

What is the amount of expense relative to compensated absences that should be reported on Havans income statement for 2019 and 2020 ? ( 5 marks)

Q.4 (10 marks)

On January 1, 2012 Lost Book Co. issued six-year bonds with a face value of $1,000,000 and a stated interest rate of 7% payable semiannually on July1 and January1. The bonds were sold to yield 6%.

Present value table factors are:

Present value of an ordinary annuity of 1 for 6 periods at 6% 3.79079

Present value of an ordinary annuity of 1 for 12 periods at 3% 7.72173

Present value of 1 for 6 periods at 6% 0.62092

Present value of 1 for 12 periods at 3% 0.61391

Instructions:

1. Calculate the issue price of the bonds (2 marks)
2. Prepare the amortization table and all entries required for 2012, assuming that amortization is recorded on interest payment dates.( 5 marks)
3. If bonds are callable at 98 in May 1, 2013 what would be the journal entry? (3 marks)
4. A machine cost $240,000, has annual depreciation of $40,000, and has accumulated depreciation of $180,000 on December 31, 2016. On January 1, 2017, when the machine has a fair value of $75,000, it is exchanged for a new machine with a fair value of $60,000 and $ 15,000 cash is received . The exchange lacked commercial substance.

5. Instructions

   (a) Show the calculation of the gain to be recognized from the exchange. (2 marks)

   (b) Prepare the entry for the exchange. (3 marks)

6. Havana Company has 100 employees who work 8-hour days and are paid hourly. On January 1, 2019, the company began a program of granting its employees 14 days of paid vacation each year. Vacation days earned in 2019 may first be taken on January 1, 2020. Information relative to these employees is as follows:

7. Hourly Vacation Days Earned Vacation Days Used

   Year Wages by Each Employee by Each Employee

   2019 $22 14 0

   2020 24 14 10

   Havana has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.

   Instructions:

   What is the amount of expense relative to compensated absences that should be reported on Havans income statement for 2019 and 2020 ? ( 5 marks)

   Q.4 (10 marks)

   On January 1, 2012 Lost Book Co. issued six-year bonds with a face value of $1,000,000 and a stated interest rate of 7% payable semiannually on July1 and January1. The bonds were sold to yield 6%.

   Present value table factors are:

   Present value of an ordinary annuity of 1 for 6 periods at 6% 3.79079

   Present value of an ordinary annuity of 1 for 12 periods at 3% 7.72173

   Present value of 1 for 6 periods at 6% 0.62092

   Present value of 1 for 12 periods at 3% 0.61391

   Instructions:

8. Calculate the issue price of the bonds (2 marks)
9. Prepare the amortization table and all entries required for 2012, assuming that amortization is recorded on interest payment dates.( 5 marks)
10. If bonds are callable at 98 in May 1, 2013 what would be the journal entry? (3 marks)