Question
Gringo Company has just been formed and is deciding on its accounting policies for the first time. It wants an inventory costing flow assumption that
Gringo Company has just been formed and is deciding on its accounting policies for the first time. It wants an inventory costing flow assumption that results in the lowest reported profits. Prices have been falling for the past two years and there is no end in sight to this trend. Dingo would select the:
Retail method
LIFO method
Gross profit method
FIFO method
Average cost method
5.On January 1, 2015 Canadian Flag Inc. issues 10 percent, semi-annual coupon bonds which mature five years from the issuance date. Interest of 5 percent of the face value of $100,000 is payable on January 1 and July 1 each year. The effective interest rate is 12%.
What is the journal entry recorded when the bonds are retired at maturity date?
Dr. Bonds Payable $100,000 and Dr. Discount on Bonds Payable $7,360 and Cr. Cash $107,360
Dr. Bonds Payable $92,640 and Cr. Cash $92,640
Dr. Bonds Payable $100,000 and Cr. Cash $100,000
Dr. Bonds Payable $92,640 and Dr. Discount on Bonds Payable $7,360 and Cr. Cash $100,000
Dr. Bonds Payable and Dr. Discount on Bonds Payable and Cr. Cash but for different values than those mentioned in the other alternatives
10.Which method involves the larger adjustment in the Cash Flow Statement (prepared under the indirect method) to net income in deriving funds provided by operations in the first year for a bond issued at less than par value
declining balance method of accounting for interest expense on bonds
effective interest method of accounting for interest expense on bonds
All the three statements about bonds are correct
None of the other alternatives are correct
straight-line method of accounting for interest expense on bonds
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