Reference no: EM132482159

Question 1 - Whispering Winds Corporation, a private company following ASPE, uses a periodic inventory system. On July 1, Whispering Winds purchased $65,000 of inventory, terms 3/10, n/30, f.o.b. shipping point. Whispering Winds paid freight costs of $1,700. On July 3, Whispering Winds returned damaged goods and received a credit of $6,500. On July 10, Whispering Winds paid for the goods.

Required - Prepare necessary journal entries for Whispering Winds.

Question 2 - Martinez Inc. was organized on January 1, 2020. It is authorized to issue an unlimited number of common shares and 108,000 preferred shares with a $8 dividend. The following share transactions were completed during the first year:

Jan.10 Issued 200,000 common shares for cash at $23 per share.

Mar.1 Issued 17,700 preferred shares for cash at $119 per share.

Apr.1 Issued 3,000 common shares for land. The asking price for the land was $67,000; its fair value was $61,100.

May 1 Issued 21,500 common shares for cash at $17 per share.

Aug. 1 Issued 1,200 common shares to lawyers in payment of their bill of $21,600 for services rendered in helping the company incorporate.

Sept. 1 Issued 34,000 common shares for cash at $16 per share.

Nov. 1 Issued 1,600 preferred shares for cash at $122 per share.

Required - Prepare the journal entries to record the above transactions.

Question 3 - On January 1, 2020, Blossom Corporation granted 5,900 options to executives. Each option entitles the holder to purchase one share of Blossom's common shares at $38 per share at any time after January 1, 2022. The shares' market price is $54 per share on the date of grant, and the required service period is two years.

Required - Prepare Blossom's journal entries for January 1, 2020, and December 31, 2020 and 2021. Assume that the options' fair value as calculated using an options pricing model is $120,000. Ignore forfeitures for simplification purposes.