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ASHFORD ACC206 WEEK 1 E11-17 E11-18 E11-22 E13-14

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E11-17 Journalizing bond issuance and interest payments [10-20 min]
On May 1, 2012, Noah Unlimited issues 9%, 20-year bonds payable with a maturity
value of $200,000. The bonds sell at 103 and pay interest on May 1 and November 1.
Noah Unlimited amortizes bond premium by the straight-line method.

Requirements
1. Journalize the issuance of the bonds on May 1, 2012.
2. Journalize the semiannual interest payment and amortization of bond premium
on November 1, 2012.
3. Journalize the interest accrual needed on December 31, 2012.
4. Journalize the interest payment on May 1, 2013.

E11-18 Journalizing bond transactions [15–20 min]
Clark, Inc., issued $50,000 of 10-year, 9% bonds payable on January 1, 2012.
Clark pays interest each January 1 and July 1 and amortizes discount or premium
by the straight-line method. The company can issue its bonds payable under various
conditions.

Requirements

1. Journalize Clark’s issuance of the bonds and first semiannual interest payment
assuming the bonds were issued at par value. Explanations are not required.

2. Journalize Clark’s issuance of the bonds and first semiannual interest payment
assuming the bonds were issued at a price of 95. Explanations are not required.

3. Journalize Clark’s issuance of the bonds and first semiannual interest payment
assuming the bonds were issued at a price of 106. Explanations are not required.

4. Which bond price results in the most interest expense for Clark? Explain
in detail.

E11-22 Reporting liabilities [10 min]
At December 31, MediSharp Precision Instruments owes $50,000 on accounts
payable, salary payable of $16,000, and income tax payable of $8,000. MediSharp
also has $280,000 of bonds payable that were issued at face value that require payment
of a $35,000 installment next year and the remainder in later years.

The bonds payable require an annual interest payment of $4,000, and MediSharp still owes this interest for the current year.

Requirement

1. Report MediSharp’s liabilities on its classified balance sheet. List the current liabilities
in descending order (largest first, and so on), and show the total of current
liabilities

E13-14 Effect of stock dividends, stock splits, and treasury stocktransactions [10–15 min]
Many types of transactions may affect stockholders’ equity.

Requirement
1. Identify the effects of the following transactions on total stockholders’ equity.
Each transaction is independent.

A. A 10% stock dividend. Before the dividend, 520,000 shares of $1 par
common stock were outstanding; market value was $3 at the time of the dividend.

B. A 2-for-1 stock split. Prior to the split, 65,000 shares of $4 par common stock
were outstanding.

C. Purchase of 1,000 shares of treasury stock (par value at $0.50) at $3 per share.
Sale of

D. 900 shares of $0.50 par treasury stock for $5 per share. Cost of the
treasury stock was $3 per share.

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