Original Trial Balance

\begin{tabular}{|l|l|l|} \hline Account & Debit & Credit \\ \hline Cash & 1,393,500 & \\ \hline Accounts Receivable & 120,000 & \\ \hline Accounts Payable & & 45,000 \\ \hline Unearned Revenue & & 132,500 \\ \hline Common Stock- $5 Pay ?? shares issued 1,000,000 shares authorized and outstanding & & 250,000 \\ \hline 6\% cumulative Preferred stock - 10 Par 10,000 shares authorized, issued and outstanding & & 100,000 \\ \hline Paid-in-Capital Preferred stock & & 200,000 \\ \hline Retained Earnings & & 380,000 \\ \hline Sales Revenue & & 800,000 \\ \hline Operating Expenses & 310,000 & \\ \hline Rent Expense & 84,000 & \\ \hline Total & 1,907,500 & 1,907,500 \\ \hline \end{tabular} 1. See your beginning trial balance for the amount of sales revenue generated during Year 1. The company offers an assurance type warranty that covers all repair costs, including parts and labor, for two years after the date of sale. The company estimates that warranty costs will amount to 4% of total sales. During Year 1, customers made warranty claims of $26,000 (parts) against the assurance-type warranty. Prepare the journal entries necessary to record the warranty activity. (Hint: you might need this information when calculating your provision entries) 2. The company purchased 300,$1000 face value 6%,8-year bonds for $265,043 on January 1 , Year 1. At the time of purchase, the market rate of interest was 8%. The bonds pay interest semiannually on June 30 and December 31. These bonds are NOT tax-exempt. The company will hold these securities as available-for-sale. The FMV of the bonds are $274,000 at December 31. 3. The company leased a non-specialized asset costing $300,000 on January 1, Year 1 . The present value of the lease payments is the same as the cost of the asset. Each payment will be $48,337, beginning the first day of the lease. The implicit borrowing rate is 8%. The first payment was made on the first day of the lease, as well as $7,000 paid in cash for initial direct costs. The lease requires 8 annual payments. Prepare the journal entries for the first year of the lease. It is not necessary to record the lease payment on January 1, Year 2. 4. Record the following transactions using the cost method: - On March 1, Second Intermediate Company repurchased 6,000 shares of common stock to be held in the Treasury at a cost of $22 per share. - On October 1, Second Intermediate Company resold 2,000 Treasury shares at $16 per share. 5. Record the transactions and adjusting entries related to the following activity: - Second Intermediate Company borrowed $80,000 on July 1, 2020 to purchase equipment. - The note payable is due in full in two years, and bears a 6% interest rate. - The Company determines the equipment's useful life is 5 years, and depreciates the equipment using the straight-line method for book purposes.. - For tax purposes, the Company elects to depreciate the equipment in full during Year 1. - The Company's tax rate is 21% for 2020 , and 21% for all future years. 6. Record the tax provision 7. Intermediate II Company declared and paid cash dividends of $110,000. Trial Balance \begin{tabular}{|l|l|l|} \hline Account & Debit & Credit \\ \hline Cash & 1,393,500 & \\ \hline Accounts Receivable & 120,000 & \\ \hline Accounts Payable & & 45,000 \\ \hline Unearned Revenue & & 132,500 \\ \hline Common Stock- $5 Pay ?? shares issued 1,000,000 shares authorized and outstanding & & 250,000 \\ \hline 6\% cumulative Preferred stock - 10 Par 10,000 shares authorized, issued and outstanding & & 100,000 \\ \hline Paid-in-Capital Preferred stock & & 200,000 \\ \hline Retained Earnings & & 380,000 \\ \hline Sales Revenue & & 800,000 \\ \hline Operating Expenses & 310,000 & \\ \hline Rent Expense & 84,000 & \\ \hline Total & 1,907,500 & 1,907,500 \\ \hline \end{tabular} 1. See your beginning trial balance for the amount of sales revenue generated during Year 1. The company offers an assurance type warranty that covers all repair costs, including parts and labor, for two years after the date of sale. The company estimates that warranty costs will amount to 4% of total sales. During Year 1, customers made warranty claims of $26,000 (parts) against the assurance-type warranty. Prepare the journal entries necessary to record the warranty activity. (Hint: you might need this information when calculating your provision entries) 2. The company purchased 300,$1000 face value 6%,8-year bonds for $265,043 on January 1 , Year 1. At the time of purchase, the market rate of interest was 8%. The bonds pay interest semiannually on June 30 and December 31. These bonds are NOT tax-exempt. The company will hold these securities as available-for-sale. The FMV of the bonds are $274,000 at December 31. 3. The company leased a non-specialized asset costing $300,000 on January 1, Year 1 . The present value of the lease payments is the same as the cost of the asset. Each payment will be $48,337, beginning the first day of the lease. The implicit borrowing rate is 8%. The first payment was made on the first day of the lease, as well as $7,000 paid in cash for initial direct costs. The lease requires 8 annual payments. Prepare the journal entries for the first year of the lease. It is not necessary to record the lease payment on January 1, Year 2. 4. Record the following transactions using the cost method: - On March 1, Second Intermediate Company repurchased 6,000 shares of common stock to be held in the Treasury at a cost of $22 per share. - On October 1, Second Intermediate Company resold 2,000 Treasury shares at $16 per share. 5. Record the transactions and adjusting entries related to the following activity: - Second Intermediate Company borrowed $80,000 on July 1, 2020 to purchase equipment. - The note payable is due in full in two years, and bears a 6% interest rate. - The Company determines the equipment's useful life is 5 years, and depreciates the equipment using the straight-line method for book purposes.. - For tax purposes, the Company elects to depreciate the equipment in full during Year 1. - The Company's tax rate is 21% for 2020 , and 21% for all future years. 6. Record the tax provision 7. Intermediate II Company declared and paid cash dividends of $110,000. Trial Balance