ACCOUNTING 221 Week 2 quiz> Questions and solutions graded A

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On January 1, 2017, Alpha Company purchased a significant influence shares investment in the Bravo-Zulu Company for $250,000. This investment balance represents 30% of the equity of the Bravo-Zulu... Company. During 2017, Bravo-Zulu Company reported Net Income of $25,000 on November 15, 2017 Bravo-Zulu Company paid cash dividends of $10,000 to its shareholders. Use this information to prepare the January 1, November 15 and December 31, 2017 General Journal entry (without explanation.) If no entry is required, then write "No Entry Required." General Journal: Date Accounts Debit Credit 1/1/17 Investment in Bravo-Zulu Company 250,000 Cash 250,000 (To record acquire 30% of Bravo Zulu Co.) 11/15/17 Cash 3,000 Investment in Bravo Zulu Co. 3,000 (To record Dividends received 10,000*30%) 12/31/17 Investment in Bravo Zulu Company 7,500 Revenue from Investment in Bravo Zulu Co. 7,500 (To record net income share 25,000*30%) Hide Feedback Answer: General Journal: Solution Notes: Dividends: 30% x $10,000 = $3,000Income: 30% x $25,000 = $7,500 GJ - 2 Question 2 14 / 14 points On January 2, 2017, Alpha Company purchased 15,000 shares of the stock of Zulu Company, and did not obtain significant influence. The investment is intended as a longterm investment. The stock was purchased for $12 per share, and represents a 15% ownership stake. Zulu Company made $25,000 of net income in 2017, and paid dividends of $10,000 on December 15, 2017. On December 31, 2017, Zulu Company's stock was trading on the open market for $11 per share at the end of the year. Use this information to prepare the General Journal entry(ies) (without explanation) for January 2 purchase and the December 15 & 31, 2017 record of income & gain/loss. If no entry is required then write "No Entry Required." General Journal: Date Accounts Debit Credit 1/2/17 Available for sale Securities 180,000 Cash 180,000 (To record Investment) 12/15/17 Cash 1,500 Dividend Income 1,500 (To record dividend revenue(10,000*15%)) 12/31/17 Unrealized Gain/Loss 15,000 Available for Sale Securities 15,000 (to record fair value adjustment (15,000*12-11)) Hide Feedback Answer: General Journal: Date Accounts Debit Credit1/2/17 Available-for-Sale Securities 180,000 Cash 180,000 12/15/17 Cash ($10,000 x 15%) 1,500 Dividend Income 1,500 12/31/17 Unrealized Gain/Loss - OIC 15,000 Available-for-Sale Securities 15,000 Additional Notes: Date Notes FMV 1/2/17 15,000 x $12 = $180,000 12/31/17 15,000 x $11 165,000 Unrealized Loss ($15,000) GJ - 3 Question 3 7 / 8 points Alpha company signed a $100,000 mortgage on July 1, 2016 for the purchase of their new garage building. The mortgage entailed equal monthly payments of $2,500 at the end of each month. The interest rate is 1% per month. Use this information to prepare the General Journal entry (without explanation) for the August 31, 2016 monthly mortgage payment. If no entry is required then write "No Entry Required." (Round your answer to the nearest whole dollar.) General Journal: Date Accounts Debit Credit 8/31/2016 Loan Payable 1,515 Interest Expense 985 Cash 2,500Hide Feedback Answer: General Journal: Date Accounts Debit Credit 8/31/16 Mortgage Payable 1,515 Interest Expense 985 Cash 2,500 Solution Notes: $100,000 - ($2,500 - ($100,000 x 1%)) x 1% = $985 GJ - 4 Question 4 4 / 8 points On April 30, 2016, Alpha Company issued $150,000 of 9%, 10-year bonds. The bonds were issued at par plus accrued interest and are dated January 1, 2016. Interest is paid on July 1 and January 1. Use this information to prepare the General Journal entry (without explanation) for the April 30, 2016 issue of the bonds. If no entry is required then write "No Entry Required." General Journal: Date Accounts Debit Credit 4/30/16 Cash 150,000 Bonds Payable 150,000 To issue bond 9%, 10 years, at par Hide Feedback Answer: General Journal: Date Accounts Debit Credit4/30/16 Cash 154,500 Interest Expense (Payable) 4,500 Bonds Payable 150,000 Solution Notes: $150,000 x 9% x 4/12 year = $4,500 GJ - 5 Question 5 10 / 12 points Alpha Corporation issued $100,000 of 3%, 15-year bonds on June 1, 2016 (dated April 1 2016) at 101 plus accrued interest, which is paid on April 1 and October 1. Use this information to prepare the General Journal entry (without explanation) to record the June 1, 2016 bond issue. If no entry is required then write "No Entry Required." General Journal: Date Accounts Debit Credit 6/1/16 Cash 101,500 Face value 100,000 Premium (101) 1,000 Interest Payable (2 months) 500 Hide Feedback Answer: General Journal: Date Accounts Debit Credit 6/1/16 Cash 101,500 Bonds Payable 100,000 Interest Expense (Payable) 500Premium on Bonds Payable 1,000 Solution Notes: Accrued Interest 2 months: $100,000 x 3% x 2/12 year = $500 GJ - 6 Question 6 8 / 8 points On August 1, 2016, Alpha Company entered into a capital lease, and correctly recorded the leased asset, and related obligation at $50,000. The annual interest rate implicit in the lease was 9%, and the first lease payment of $2,000 is due at the end of each month of the lease. Use this information to prepare the General Journal entry (without explanation) for the August 31, 2016 monthly lease payment. If no entry is required then write "No Entry Required." (Round your answer to the nearest whole dollar.) General Journal: Date Accounts Debit Credit 8/31/16 Capital Lease 1,625 Interest Expense 375 Cash 2,000 Hide Feedback Answer: General Journal: Date Accounts Debit Credit 8/31/16 Interest Expense 375 Obligation Under Capital Lease 1,625 Cash 2,000 Solution Notes:Interest Expense: $50,000 x 0.75% = $375 FIB - 1 Question 7 4 / 4 points Alpha company purchased a bond investment on January 1, 2017. The bonds have a par of $10,000, pay interest at a 4% annual rate and have 5 years until maturity. What is the total Interest Income that will be reported over the life of the bond investment if the bonds were purchased at 102 and Alpha uses the straight line amortization method? Answer: $1,800 View Feedback FIB - 2 Question 8 8 / 8 points On January 1, 2017, Alpha Company purchased a significant influence shares investment in the Bravo-Zulu Company for $250,000. This investment balance represents 30% of the equity of the Bravo-Zulu Company. During 2017, Bravo-Zulu Company reported Net Income of $25,000 on November 15, 2017 Bravo-Zulu Company paid cash dividends of $10,000 to its shareholders. Using this information, what are the FY 2017 balances in Alpha Company's account balances for: a. Investment in Bravo-Zulu b. Investment Income Answer for blank # 1: $254,500 (50 %) Answer for blank # 2: $7,500 (50 %) Hide Feedback Answer: a. $254,500 b. $7,500 Solution Notes: Dividends: 30% x $10,000 = $3,000 Income: 30% x $25,000 = $7,500 Investment in Bravo-Zulu Investment Income1/1/17 250,000 11/15/17 3,000 12/31/17 7,500 12/31/17 7,500 ________ Bal. 254,500 FIB - 3 Question 9 4 / 4 points Immediately following an acquisition, the Alpha Company's balance sheet included cash $50,000, investment in subsidiary $250,000, plant assets $450,000, and liabilities $150,000. The wholly owned subsidiary (Bravo-Zulu Company) had cash $75,000, plant assets $145,000, and liabilities $60,000. All balances are normal. There are no other assets or liabilities, and the given values for the subsidiary are also equal to their fair values. Use this information to determine the dollar value of Goodwill that will be recorded in Alpha Company's consolidated balance sheet? Answer: $90,000 Hide Feedback Answer: $90,000 Solution Notes: Sales Price of Bravo-Zulu Company $250,000 Net Assets over Liabilities: Cash $75,000 FMV Plant Assets $145,000 FMV Liabilities (60,000) 160,000 Goodwill $90,000 FIB - 4 Question 10 10 / 12 points On January 2, 2017, Alpha Company purchased 10,000 shares of the stock of Zulu Company, and did not obtain significant influence. The investment is intended as a longterm investment. The stock was purchased for $10 per share, and represents a 10% ownership stake. Zulu Company made $25,000 of net income in 2017, and paid dividends of $10,000 on December 15, 2017. On December 31, 2017, Zulu Company's stock was trading on the open market for $12 per share at the end of the year. Use this information to determine the dollar amounts that should be reported by Alpha Company during 2017 for the following items: 1. Dividend Income 2. Unrealized Gain/Loss - OIC (If a loss, enter the amount with dollar sign inside of brackets) 3. Available-for-Sales Securities Answer for blank # 1: $1,000 (33.33 %) Answer for blank # 2: $20,000 (33.33 %) Answer for blank # 3: $100,000 ($1,000, $20,000, $120,000) Hide Feedback Answer: a. $1,000 b. $20,000 c. $120,000 Solution Notes: Date Notes FMV 1/2/17 10,000 x $10 = $100,000 12/31/17 10,000 x $12 120,000 Unrealized Gain $20,000 FIB - 5 Question 11 2 / 4 points On December 31, 2016, Alpha Company invested $10,000 in 2 years, certificate with a 8% annual interest rate with semi-annual compounding. Use this information to determine the maturity value of the certificate on December 31, 2018? (Round your answer to the nearest whole dollar.) Answer: $12,916 Hide Feedback Answer: $11,699 Solution Notes: $10,000 X 1.04 to the fourth power FIB - 6Question 12 2 / 4 points On June 30, 2016, Alpha Corporation issued $600,000 of 7%, 10-year bonds at 98½ its semiannual interest date. Alpha uses the straight-line method for amortization. Use this information to determine the carrying value of this bond issue after adjusting entries have been made on June 30, 2019? Round your answer to the nearest whole dollar. Answer: $599,100 Hide Feedback Answer: $593,700 Solution Notes: Date Interest Expense Interest $ Paid Amortization Discount Carrying Value 6/30/16 $9,000 $591,000 12/31/16 $21,450 $21,000 $450 8,550 591,450 6/30/17 21,450 21,000 450 8,100 591,900 12/31/16 21,450 21,000 450 7,650 592,350 6/30/18 21,450 21,000 450 7,200 592,800 12/31/18 21,450 21,000 450 6,750 593,250 6/30/19 21,450 21,000 450 6,300 593,70 [Show More]

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