Prepare the following journal entries Each number is a separate entry:
10 On 7/1/14, ABC sold 12% bonds having a maturity value of $800,000 for $861,771, resulting in an effective yield of 10%. The bonds are dated 7/1/14, and mature 7/1/19. Interest is payable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount. Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14. Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense. 11 The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies. Securities Cost Fair Value 2,200 shares of Toyota Corporation Common Stock $ 100,000 $125,000 1,100 shares of G.M. Corporation Common Stock $ 67,000 $ 34,000 $ 167,000 $ 159,000 Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading. 12 On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824, which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used. Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the investment account. 13 ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, prepare the entry to record bad debt expense. 14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 unguaranteed residual value. The delivery vehicle revests back to the lessor at the end of the lease term. ABC Corporation amortizes the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. After determining the type of lease arrangement (financing or operating), prepare the necessary multiple-part journal entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.)
