PROBLEM 1

James (investor) Corporation acquires 25% of the common shares of Heck (investee) Company for $350,000 on January 1, 2014. For 2014, Heck reports net income of $50,000 and paid dividends of $16,000.

Instructions

• Prepare the entries for these transactions that James Corporation would make in the space provided below.
• Compute the balance in the stock investment account of James Corporation.

• NOTE: Use the tab keys to move within the tables.

(a)

Date	Account	Debit	Credit

(b)

PROBLEM 2

On January 1, James Corporation issued $400,000, 4%, 5-year bonds at 103. Interest is payable semiannually on July 1 and January 1. Straight-line amortization method is used.

Instructions

Prepare journal entries to record the

(a) Issuance of the bonds.

(b) Payment of interest on July 1, assuming no previous accrual of interest. Need to also show the entry of the amortization of the premium to interest.

(c) Accrual of interest on December 31. Need to also show the entry of the amortization of the premium to interest.

Date	Account	Debit	Credit

PROBLEM 3

On January 1, Papel Corporation issued $250,000, 6%, 5-year bonds at 96. Interest is payable semiannually on July 1 and January 1.

Instructions

Prepare journal entries to record the

(a) Issuance of the bonds.

(b) Interest entries at time of payment on July 1, assuming no previous accrual of interest. Need to also show the entry of the amortization of the discount to interest.

(c) Interest entries for the accrual of interest on December 31. Need to also show the entry of the amortization of the discount to interest.

Date	Account	Debit	Credit

PROBLEM 4

Here are comparative balance sheets for Mary Jane Company.

MARY JANE COMPANY
Comparative Balance Sheets
December 31
Assets	2014		2013
Cash	$72,710		$22,001
Accounts receivable	85,652		76,161
Inventories	169,800		188,601
Land	75,070		100,300
Equipment	259,540		200,580
Accumulated depreciation	(65,861)		(32,198)
Total	$596,911		$555,445
Liabilities and Stockholders' Equity
Accounts payable	$39,209		$46,636
Bonds payable	151,530		203,230
Common stock ($1 par)	214,140		175,750
Retained earnings	192,032		129,829
Total	$596,911		$555,445

Additional information:

1. Net income for 2014 was $101,690, depreciation was $33,663.
2. Cash dividends of $39,487 were declared and paid.
3. Bonds payable amounting to $51,700 were redeemed for cash $51,700.
4. Common stock was issued for $38,390 cash.
5. Land was sold for $25,230 cash, there was no loss.
6. Equipment was purchased for $58,960 cash.

Instructions

Prepare a statement of cash flows for 2014 using the indirect method. Use the template provided on the next page.

MARY JANE COMPANY Statement of Cash Flows For the Year Ended December 31, 2014
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Net cash provided by operating activities
Cash flows from investing activities
Net cash provided by investing activities
Cash flows from financing activities
Net cash used by financing activities
Net Increase in cash
Cash at beginning of period
Cash at end of period