Textbook: Principles of Financial Accounting 23rd edition

Q#1 (20%)

Amex Corp. purchased 500 shares of Boeing common shares at $300 per share on June 20, 2019. On October 25, 2019 Boeing paid cash dividends of $1.00 per share to all shareholders. On December 31, 2019 Boeing shares traded at $310 per share.

Required:

(a) Provide the journal entry for Amex Corp. on June 20, 2019.

(b) Provide the journal entry for Amex Corp. on October 25, 2019.

(c) If Amex classifies its investment in Boeing shares as short-term trading securities, provide the adjusting entry to record the change in fair value on December 31, 2019.

(d) If Amex classifies its investment in Boeing shares as long-term available-for-sale securities, provide the adjusting entry to record the change in fair value on December 31, 2019.

(e) On March 8, 2020, Amex sold 200 Boeing shares at $280 per share. Provide the journal entry to record the transaction.

Q#2 (20%)

For each transaction or event below, indicate with X where each item would appear on a Cash Flow Statement prepared using the indirect method:

Operating Investing Financing Noncash

a. Prepaid rent decreased during year ______ _______ ________ ________

b. Recorded amortization expense ________ _______ ________ ________

c. Buy land by issuing bonds ________ _______ ________ ________

d. Taxes payable increased during year _____ _______ ________ ________

e. Declared and paid cash dividends ________ _______ ________ ________

f. Using the indirect method, preparing the operating activities section of Kumos 2019 Cash Flow Statement:

Selected 2019 Kumo Income Statement Data Selected 2019 Kumo Balance Sheet Data

Net Income $100,000 Accounts receivable increase $15,000

Depreciation Expense $ 20,000 Inventory decrease $ 8,000

Amortization Expense $ 10,000 Accounts payable increase $12,000

Loss on land sale $ 35,000 Wages payable decrease $ 4,000

g. Use the following information to prepare Tomas 2019 cash flows from investing activities:

i. Paid $45,000 for a forklift.

ii. Long-term investment in stocks were sold for $70,000 cash, providing a gain of $7,000.

iii. Acquired land valued at $100,000 by issuing common stock.

iv. Truck with a book value of $15,000 was sold at a loss of $4,000.

v. Purchased Amazon common stock for $80,000 cash.

Q#3 (20%)

Crown Inc. issued 3-year bonds dated January 1, 2020, with a par value of $200,000. The bonds annual contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The annual market rate at the issuance date is 8%.

Required:

(a) Using the PV tables provided, compute the total price of the bonds on the issuance date?

(b) How much cash payment will Morgan pay on the bonds on June 30, 2020?

(c) How much total bond interest expense will be recognized over the life of these bonds?

(d) Use the effective interest rate method to complete the amortization table below:

Dates	Cash interest paid	Bond Interest Expense	Discount Amortization	Unamortized Discount	Carrying Value
1/1/2020
6/30/2020
12/31/2020
6/30/2021

Q#4 (20%)

Kent Company has 3 employees. FICA Social Security taxes are 6.2% of the first $120,000 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5% of the first $8,000 paid to each employee. Cumulative pay through June 30 for the current year and Gross pay for June for each employee follows:

Name of Employee: Ari A. Bill B. Carl C.

Cumulative pay through June 30: $7,000 $50,000 $130,000

Gross pay for June: $2,000 $10,000 $20,000

Required:

(a) Complete the table below:

Cumulative Pay subj to Pay subj to Pay subj to Pay subj to

Employee Pay FICA-SS FICA-Med FUTA taxes SUTA taxes

Ari A. $_________ $________ $________ $_________ $________

Bill B. $_________ $________ $________ $_________ $________

Carl C. $_________ $________ $________ $_________ $________

(b) Prepare Kent Companys June 30 journal entries to record salary expense and its related payroll liabilities for Bill B., assuming that Bills income tax withheld (reported in W-4) for June is $2,000.

(c) Prepare Kent Companys June 30 journal entries to record its employers related payroll tax expense for all 3 employees for month of June.