I'm not sure if I did question 1 correctly... More specifically the sections highlighted in yellow.

Part G- pretty sure this is correct, but would appreciate a confirmation.

Part I- i know i can't have two minus signs, but I couldn't find an example that showed the proper way to record this transaction.

Part J- Same issue as part I

Week2 Exercise3 Accounting for Liabilities and Equity Student Name: Nadine Trombley 1. Transaction Analysis For each of the following transactions, show the effect if any of the transaction or adjustments on the appropriate balance sheet category or on net income by ensuring for each category affected the account name and amount and indicate whether this is an addition (+) or subtraction (-) using the horizontal analysis. Items that affect net income should not be shown as affecting owners' equity. Instructions: for each row of transaction, fill in the appropriate column with the actual account name (e.g. Cash, Accounts Receivable, Inventory, Accounts Payable, Bonds Payable, Rent Expense, etc.) and the amount with its sign convention (e.g., +15, +1,000, -1,500, etc.). The horizontal analysis is the textbook's [pg. 32] Accounting Equation. Therefore, the Net Income column in the table below, due to lack of space, really refers to the Revenue account and Expense account. Assets Transaction / Adjustment a. Current Asset Liabilities Noncurrent Asset Bonds Payable with a face amount of $12,000 are issued at par on Sep 1st. The coupon interest rate is 10% (annual rate) and interest is paid semi-annually. At the end of December, the company accrues the interest that is payable on the bonds issued in (a). Cash +12,000 c. On Mar 1st the company pays the interest on the bonds from (a). In a separate Bonds Payable, unrelated to (a), a face amount of $10,000 are issued at a price of 95 (that means at 95% of par value). Cash +9,500 e. Of the proceeds from the bonds issued in part (d), $7,000 is used to purchase a new machine. Because of warranty claims, finished goods inventories costing $300 is sent to customers to replace defective products. A 3-month 4% short-term borrowing with face amount of $20,000 was signed by the company with the bank on a discount basis. Amount due at end of current accounting period. Cash -7,000 Warranty Expense -300 Noncurrent Liability Cash -600 d. Current Liability b. f. g. h. Revenue Expense Bonds Payable +12,000 Bonds Interest Payable +396 Bonds Interest Payable +396 Bonds Interest Payment -600 Bonds Payable +10,000 -500 Equipment +7,000 Cash +20,000 Cash -20,200 Estimated Warranty Liability -300 Notes Payable +20,000 Notes Payable -20,000 Long-Term Loan Payoff +3,000 One of the long-term debt with principal of $3,000 will become due within the current accounting year. Cash -3,000 AD-632OL: Financial Concepts Equity Interest Expense -200 Long-Term Loan Payment -3,000 Loan Payment -3,000 -1/ 2016 Spring2 Wk2 Ex3 i. j. At the end of the month, the company recognizes its rent obligation of $3,000 which it has not yet paid. A month later, the company pays that month's rent of $3,000 and pays the previous month's rent from (i) which it owed. Rent Payable +3,000 Previous Rent Payable -3,000 Cash -6,000 Rent Expense -3,000 Rent Expense -3,000 2016 Spring2 AD-632OL: Financial Concepts -2/ 2016 Spring2 Wk2 Ex3 2. Bonds payable - discount bond, amortization, interest expense On January 01, 2016 Roberts Inc. issued $10 million face value of 5-year 10% coupon rate bonds with a market interest rate of 12%. The bonds pay coupon interest annually and mature on Dec. 31, 2020. Because the market interest rate was higher than its coupon rate, the bond was issued at a discount and the company only received $9,279,045 in cash. [PS: the bond present value of $9,279,045 is calculated for you in this question. In Week4, when we move on to the Finance content, you will learn about Time Value of Money and Bond Valuation. The above value would have gotten by doing N=5; I=12; PMT=1,000,000; FV=10,000,000 to calculate PV more accurately as 9,279,044.76] a. Analyze this bond issuance transaction by stating the appropriate account name and its value in the following horizontal analysis table: Assets +9,279,045 Liabilities +10,000,000 -720,955 Common Stock Dividend Debit 9,279,045 720,955 Equity Revenues Expenses Credit ... also record this transaction using the following Journal: Journal Entries Cash Discounts on Bonds Payable Bonds Payable Sold bonds at a discount on their issuance date. b. 10,000,000 Assume that the accounting period is on an annual basis, what is the annual interest expense? AD-632OL: Financial Concepts -3/ 2016 Spring2 Wk2 Ex3 Ex3, Q2b Total Bond Interest Expense (Bond Discount) + = = = = = Bond Interest Expense = (Face Value - Bond (10,000,000 - 9,279,045) 720,955 720,955 6,720,955 + + + + = = = c. (All Coupon Payments) (All Coupon Payments) (12% x 10,000,000 x 5 years maturity) 1,200,000 6,000,000 Straight-Line Ammortization of a Bond Discount (Face Value - Bond + All Coupon Payments / 5 Price) / 5 Annual 144,191 + 1,200,000 1,344,191 Then state the appropriate account name and its value for this interest expense payment using the following horizontal analysis table: Assets Liabilities Common Stock Dividend Debit 1,200,000 Equity Revenues Credit Cash -1,055,809 Expenses Bonds Interest Expense +1,200,000 -144,191 ... also record this transaction using the following Journal: Journal Entries Bond Interest Expense Discount on Bonds Payable Cash Annual coupon (cash) payment and amortization of the discount (straight-line method). AD-632OL: Financial Concepts 144,191 1,055,809 -4/ 2016 Spring2 Wk2 Ex3 3. Common stock balance sheet disclosure The balance sheet caption for common stock is the following: Common stock, $10 par value, 10,000,000 shares authorized, 8,000,000 shares issued, 7,000,000 shares outstanding. $ ??? a. Calculate the dollar amount that will appear in the caption above. b. If the stock dividend is $0.10 per share, calculate the total amount of cash being paid out. Shares Outstanding 7,000,000 c. Stock Dividend x $0.10 = $700,000 What accounts for the difference between the issued shares and outstanding shares? [no calculations; just explain the difference] Common stock shares authorized- Those available to issue to investors. The total number is established in a company's legal formation documents. Common stock shares issued- The number of shares a company has decided to sell. Typically only a fraction of the number of shares the company was authorized. This permits companies to issue new stock as needed. Common stock shares outstanding- The number of shares actually trading on the market. Shares that are issued or sold to investors from the available number of authorized shares. The total number of outstanding shares cannot be greater than the total number of authorized shares. Treasury stock shares- Any shares that the company has repurchased. Typically, these are used to provide stock options to employees or other incentive programs. AD-632OL: Financial Concepts -5/ 2016 Spring2 Wk2 Ex3