On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on December 31. The bonds mature at the end of four years. Olive uses the effective-interest amortization method. The partially completed amortization schedule below pertains to the bonds:

1. Complete the amortization schedule. (Enter all your values in positive. Round your final answers to nearest whole dollar amount.)

2. When the bonds mature at the end of Year 4, what amount of principal will Olive pay investors?

3. How much cash was received on the day the bonds were issued (sold)?

4. Were the bonds issued at a premium or a discount? If so, what was the amount of the premium or discount?

5. How much cash will be disbursed for interest each period and in total over the life of the bonds?

6. What is the coupon rate? (Enter your answer as a percentage rounded to 1 decimal place (i.e. 0.123 should be entered as 12.3).)

7. What was the annual market rate of interest on the date the bonds were issued? (Enter your answer as a percentage rounded to 1 decimal place (i.e. 0.123 should be entered as 12.3).)

8. What amount of interest expense will be reported on the income statement for Year 2 and Year 3? (Round your final answers to nearest whole dollar amount.)

The following transactions apply to Jova Company for Year 1, the first year of operation:

1. Issued $17,500 of common stock for cash.

2. Recognized $62,500 of service revenue earned on account.

3. Collected $56,000 from accounts receivable.

4. Paid operating expenses of $36,800.

5. Adjusted accounts to recognize uncollectible accounts expense. Jova uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 2 percent of sales on account

The following transactions apply to Jova for Year 2

1. Recognized $70,000 of service revenue on account.

2. Collected $64,000 from accounts receivable.

3. Determined that $850 of the accounts receivable were uncollectible and wrote them off.

4. Collected $100 of an account that had previously been written off.

5. Paid $48,000 cash for operating expenses.

6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncollectible accounts expense will be 1.0 percent of sales on account

Required

Complete the following requirements for Year 1 and Year 2. Complete all requirements for Year 1 prior to beginning the requirements for Year 2.

1. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).

2. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, − for decrease, and leave the cell blank if there is no effect. Also, in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. (Hint: Closing entries do not affect the statements model.) (If there is no effect on the Statement of Cash Flow, leave the cell blank. Not all cells will require entry.)

3. Organize the transaction data in accounts under an accounting equation.

4. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1.

5. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 2.

1. Would you rather receive $1,000 a year for 10 years or $800 a year for 15 years if:
   
   Present Value = FV after t periods / (1+r)^t

1. The interest rate is 5 percent?

Response and rationale:



Present value = PV = future value /

2. The interest rate is 20 percent?

Response and rationale:

3. Why do your answers to “(a)” and “(b”) differ?

Response:

On the first day of the fiscal year, a company issues a $2,000,000, 9%, 5-year bond that pays semiannual interest of $90,000 ($2,000,000 × 9% × ½), receiving cash of $1,922,782.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

A 7 year old has experienced recurrent tonsillitis for the past year. He is scheduled for a tonsillectomy later in the day. You are assessing the child to obtain a baseline and is providing pre-operative teaching and a tour of the recovery area and day surgery area to the child and parents.

1. What health history is important to elicit from the family?

2. What content should the nurse emphasize in pre-operative teaching directed to the parents?

3. What content should the nurse emphasize in pre-operative teaching directed to the child?

4. What physical assessments of the child are indicated?

Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year: Sales $650,000 Corporate dividend (from 5% owned corporation) 60,000 Municipal bond interest 25,000 Long-term capital gain 0 Short-term capital loss (8,000) Cost of goods sold 320,000 Depreciation 65,000 Nondeductible fines 4,000 Advertising 7,000 Utilities 6,000 Rent 5,000 Furthermore, Sunshine’s liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year. 1) Assume that Sunshine Company is owned by Alvin as a sole proprietorship. Alvin received $2,400 per month ($28,800 in total) from Sunshine Company as an owner’s draw. Additionally, Alvin took $55,000 out of Sunshine Company near the end of the year as a partial distribution of profits.

a) Calculate the net business income of Sunshine Company/Alvin that would be reported on Schedule C of Alvin’s Form 1040.

b) How much of the $2,400 per month ($28,800 total) and the $55,000 distribution would Alvin include as taxable income on his Form 1040?

c) What amount of Alvin’s income will be subject to self-employment tax?

d) Note that you do not need to complete Schedule C or other forms, but these form will be a useful guide in completing this portion of the assignment.

2) Assume that Sunshine Company is a c corporation. Alvin contributed $60,000 to purchase 60% of the stock while his wife’s best friend, Ann, contributed $40,000 to purchase the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary ($28,800 in total). Ann doesn’t work for the company so she received no salary. The company distributed some profits at the end of the year by paying out a $55,000 dividend.

a) Calculate Sunshine Corporation’s taxable income and income tax liability to be reported on Form 1120.

b) What amount and type of income must Alvin report on his individual Form 1040 tax return?

c) What amount of Alvin’s income will be subject to self-employment tax?

d) What is Alvin’s basis in his Sunshine stock at the end of this year?

e) Note that you do not need to complete Form 1120 but this form and related schedules will be a useful guide in completing this portion of the assignment

The basic data are presented below for the three years covered by the example: Year 1-Year 3. There were 40 units in beginning inventory at the start of Year 1. Each of these units had a cost basis of $30 per unit.

                                          Year 1                                                   Year 2                                                   Year 3

Purchases         Jan.22 120@$31                                Feb.15 210@$36                                Jun.20 280@$42

                                Mar.20 240@$32                               Apr. 20 180@$38                              Aug.30 300@$46

                                Jul.30 310@$33                                  Dec.17 100@$40

Sales                     Jan.11 20@$60                                   Jan.15 50@$70                                   Jul.16 220@$84

                                May 15 320@$60                              Jul.30 150@$90                                 Nov.20 250@$90

                                Nov.25 300@$65                               Dec.20 350@$90

Sales and purchases are the same numbers for a particular year regardless of the inventory method being used. Sales figures for Year 1-Year 3 are $39,900, $48,500 and $40,980, respectively. Purchases for the same three years, respectively, are $21,630, $18,400 and $25,560.

Ending inventories for each system and for each method will usually vary by year depending on the particular sequence of the purchases and the sales. There is one notable exception: FIFO will always produce the same result for the perpetual system as for the periodic system. [LIFO liquidation occurs during Year 2.]

Ending Inventories:

●Perpetual/Periodic FIFO Year 1                         $_____

■Perpetual LIFO Year 1                                      $_____

●Periodic LIFO Year 1                                        $_____

■Periodic Weighted Average Year 1                   $_____

●Perpetual Weighted Average Year 1                  $_____

Acme Corporation uses the calendar year as their fiscal year for reporting purposes. Acme Corporation is owned 100% by Jesse Smith. Jesse Smith is quite wealthy - he has over $3 million in a personal savings account which is currently earning 2 one hundredths of 1% interest (or .0002 rate resulting in $600 per year). He also has many other investments. Acme Corporation has $300,000 of current assets. Acme has Accounts Payable of $40,000 and various Payroll liabilities totaling $109,000. Acme also has a Note Payable in the amount of $800,000. There are no other liabilities. Interest has been paid every year when due on December 31. The Note Payable is due in $200,000 installments on June 30 of each year for the next 4 years. The current interest rate on the note is 4%. However, according to the loan terms, if Acme's current ratio falls below 2, the interest rate will automatically increase to 7%. Since the note is due in installments over the next 4 years, management is presenting the Note on the balance sheet as a long term liability.

Is Acme's management reporting their balance sheet appropriately? What recommendations do you have for management? How do these recommendations impact the current ratio?

A 2%, 3-year US Treasury is selling at 100.25 . The 5% , 3-year IBM is selling at 100.65. Both bonds pay interest semi-annually. The G-spread in basis points on the IBM bond is closest to

A 3-year floating-rate note pays 6-month Libor plus 140 bps. The floater is priced at 97 per 100 of par value. Current 6-month Libor is 1.00%. Assume a 30/360 day-count convention and evenly spaced periods. The discount margin for the floater in basis points is closest to: