Question

Excercise I : On May 1 Year 1, Frank Corporation issued bonds payable at face value at par value ,The bonds had a face value of 30million dollars,12% interest per year for 20 years,Interest on the bonds is payable every 6 months on May 1 and November 1

Q1) On May 1 what will be the journal entry to record the issuing of the bonds?

Q2) The first interest payment to bond holders will be on November 1 Year 1 the journal entry on november 1 will be?

Q3) What will be the adjusting entry on December 31 Year 1, related to this bond issue?

Q4) The corporations balance sheet at december 31 Year 1 will include …

a)bonds payable of x

b)bonds payable of y

c)bonds payable of alpha and interest payable of beta

d)bonds payable of y and interest payable of x

Excercise II: For the current year, Lydia company On March 31, 2015 North bank have 500,000 shares and 2-dollar par value, common stock issue, on that date, the company declared 10 % stock dividends, the market price of each shares is $25, the immediately effect of this stock dividends on North Bank books is the

a) a reduction in retained earnings x dollars

b) a reduction in retained earnings of y dollars

c)a reduction in cash of x dollars

d)a liability to the share holders of alpha dollars

e)a reduction in cash of delta dollars

Excersise III : Matos corporation invested 320,000 cash in marketable securities on Dec.4. On Dec. 31, the market value for this security is 337,000, which of the following statement is correct: Answer:

a) Matos Balance sheet report market securities 337,000 and unrealized gained of 17,000

b) If Matos sell this investment on Jan. 2 for 300,000, it will report loss of 37,000

c)Matos's Decembers income statement includes a 17,000 gain on investment

d)Matos's Dec. balance sheet report Market securities at 320,000 on unrealized gained on 17,000

Answer 1

Exercise 1
	Journal
	Date	Particulars	Debit	Credit
	Year 1		$	$
Q1	May-01	Bank A/c                                                                       Dr.	30000000
		To 12% Bonds		30000000
		(Being 12% Bonds issued at Par)
Q2	Nov-01	Interest A/c                                                                   Dr.	1800000
		To Bondholders A/c		1800000
		(Being Interest Due)
	Nov-01	Bondholders A/c                                                        Dr.	1800000
		To Bank A/c		1800000
		(Being Interest Paid)
	Nov-01	Profit & Loss A/c                                                          Dr.	1800000
		To Interest A/c		1800000
		(Being Interest transferred to P&L A/c)
Q3	Dec-01	Interest A/c                                                                   Dr.	600000
		To Interest Accrued but not due A/c		600000
		(Being Interest Accrued for 2 months but not Due)