How to answer question 5?

1. Analyze the following four events and prepare a schedule showing the amount John's should accrue for loss contingencies in 2014. Expropriation of John's foreign assets, valued at $3,000,000, appears reasonably possible. John's legal counsel has concluded that it is probable that the company will be required to pay damages of $500,000 in a lawsuit. It appears remotely possible that a major customer will be unable to repay Johns on a note receivable for $100,000. John's controller estimates that $250,000 of the company's pledged receivables are likely to be uncollectible, and the lender will require Johns to honor the amounts. 2. The Salty Chip Company includes one coupon having no expiration date with its deluxe snack pack. Upon return of 10 coupons, Salty Chip will send a silver chip clip, which costs Salty Chip $1.50 each. Past experience indicates that 30% of coupons issued will be redeemed. Salty Chip began this promotion in 2013 and sold 1,000,000 deluxe snack packs. During 2013, 90,000 coupons were received and 9,000 chip clips were distributed to customers. Prepare a schedule to determine the liability for coupons that should be included on the December 31, 2013 balance sheet. 3. On March 1, 2014, the Husky, Inc. issued $3 million of ten-year, 8% Bonds that were sold to yield 10%. Interest is paid twice a year on September 1 and February 1. The company uses the effective interest rate method. a. Prepare an amortization schedule using excel. Print it out and attach to your test. b. In the space below, prepare the Note the company should include with its December 31, 2016 financial statements. 4. Trevor had outstanding 40,000 shares of $30 par convertible preferred stock that had been sold at $50 a share. One-fourth of these were converted into common stock at the stated ratio of four shares of $5 par common stock (now selling at $15 a share) for each share of preferred stock. a. Record the conversion of preferred into common stock. b. Use the same information as in requirement (a) except assume that each share of preferred stock is convertible into two shares of $35 par common stock (now selling at $40 a share). Record this conversion of preferred into common stock. c. Why would Trevor not want to have common stock converted into preferred stock? 5. A. On January 1, 2015, Leslie Co. issued $100,000 of 8% ten-year bonds at 97. Issuance costs amounted to $2,000. On July 1, 2020, all of the bonds were called at 103. Prepare a schedule to determine the gain or loss on the bonds' retirement. Assume the use of straight-line amortization is used. B. On January 1, 2014, New Country issued %200,000 of ten-year 8% bonds at 98. These bonds were callable at 102 any time after three years. Straight-line amortization was used. On January 1, 2018, a new bond issue was sold and the old bonds were called. Prepare a schedule to determine the gain or loss on bonds' retirement. Assume the use of straight-line amortization is used. 6. On May 1, Lawrence, Inc., entered into a subscription contract with several subscribers that calls for the purchase of 2,000 shares of $5 par common stock for $15 per share. The contract calls for a 20% down payment and specifies that any amounts not paid within the contract period will be forfeited in full. The contract ends on December 31. a. Prepare the initial entries to record this subscription and the down payment. b. On the final dates, assume subscribers defaulted on 200 of the shares. Prepare the entries to record the default. c. Prepare the entries to record the receipt of the final payment and the issuance of 1,800 shares. 7. In the space below, explain how stockholders' equity and net income be affected by the issuance of stock purchase rights to employees under a noncompensatory share purchase plan? How would stockholders' equity and next income be affected if the stock purchase plan was compensatory