Reference no: EM132597591

Questions -

Question 1: Assume Speedy Transport Ltd.'s balance sheet includes the following assets under Property, Plant, and Equipment: Land, Buildings, and Motor-Carrier Equipment. Speedy has a separate accumulated depreciation account for each of these assets except Land. Further, assume that Speedy completed the following transactions in 2019:

Jan 2 Sold motor-carrier equipment with accumulated depreciation of $110,900 (cost of $145,000) for $65,000 cash. Purchased similar new equipment with a cash price of $187,000

July 3 Sold a building that had cost $478,000 and had accumulated depreciation of $222,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building had a 40-year useful life and a residual value of $24,000. Speedy received $157,000 cash and a $93,325 note receivable

Oct 29 Purchased land and a building for a single price of $479,000. An independent appraisal valued the land at $201,000 and the building at $309,000.

Dec 31 Recorded depreciation as follows:

a) New motor-carrier equipment has an expected useful life of six years and an estimated residual value of 5% of cost. Depreciation is computed on the double-declining-balance method.

b) Depreciation on buildings is computed by the straight-line method. The new building carries a 40-year useful life and a residual value equal to 10% of its cost

Required: Record the transactions in Speedy Transport Ltd.'s journal.

Question 2: Suppose Hector Wilson (HW) buys $800,000 of Amexon bonds at a price of 106. The Amexon bonds pay cash interest at the annual rate of 7% and mature at the end of 5 years. Journalize the following on HW's books:

a) Purchase of the bond investment on January 2, 2019. HW expects to hold the investment to maturity

b) Receipt of annual cash interest on December 31, 2019

c) Amortization of the bonds on December 31, 2019. Use the effective interest of 6.5% to amortize the investment

d) Collection of the investment's face value at the maturity date on January 2, 2024. (Assume the receipt of 2023 interest and amortization of bonds for 2023 have already been recorded, so ignore these entries)

Question 3: Perth Talent Search has an annual payroll of $150,000. At December 31, 2019

Perth owes salaries of $7,300 of which employee withholdings payable are $1,700, and employee benefits payable by the company are $1,500. The company has calculated its share of Canada Pension Plan, Employment Insurance, and other employee benefits to be 4% of payroll expense. The company will pay these amounts early next year. Show what Perth will report for the foregoing on its 2019 income statement and its balance sheet at December 31, 2019. (please show your calculations to support the amounts reported)

Question 4: The accounting records of Ernestown Electric Inc. (EE) included the following balances before the year end adjustments:

Estimated warranty liability Sales revenue Warranty expense

In the past, EE's warranty expense has been 3% of sales. During the current period, the business paid $6,300 to satisfy the warranty claims of customers.

Required:

a) Record EE's warranty expense for the period and the company's payments to satisfy warranty claims

b) Show what EE will report on its income statement and balance sheet for this situation (show supporting calculations)

c) Which item from part (b) will affect EE's current ratio? Will EE's current ratio increase or decrease as a result of this item?

Question 5: Millington Industries Ltd. borrowed money by issuing a $30,000, 6.4%, 10-year bond. Interest is to be paid every six months (semi-annually). Assume the issue price was 89 on April 1, 2019.

a) How much cash did Millington Industries receive when it issued the bond?

b) How much must Millington Industries pay back at maturity? When is the maturity date?

c) How much cash interest will Millington Industries pay each six months?

d) How much interest expense will Millington Industries report each six months? Assume the straight-line amortization method.

Question 6: The following transactions of 5 String Music Company occurred during 2019 and 2020:

2019

Mar 3

Purchased a Steinway piano (inventory) for $43,000, signing a six-month, 10% note

Apr 30

Borrowed $53,000 on a 11% note payable that calls for annual instalment payments of $26,500 principal plus interest. Record the short-term note payable in a separate account from the long-term note payable

Sept 3 Paid the six-month, 10% note at maturity

Dec 31 Accrued warranty expense, which is estimated at 4% of sales of $190,000

Dec 31 2020 Accrued interest on the outstanding note payable

Apr 30 Paid the first instalment plus interest for on year on the outstanding note payable

Required: Record the general journal entries for 5 String Music.