Question 1
Intermediate Accounting II Note: Please answer all the questions and show your answers. Please attach all su pporting calculations if you wish to receive partial credit. Total 100 POINTS. 1. Peterson Co issued bonds on May 1, 2009. The face value of the bond is $340,000 and has a coupon rate of 8% per year. The market rate is 12% per year. Interest is paid semi-annually and it is a 4- year bond. (15 points) a. Record the issuance of the bond b. Record the interest payment and amortization of bond/premium on October 31st, 2009 using the effective interest rate method. c. On July 31st, 2010, the company retired the bonds at a price of 99. Record the retirement of the bond. 2. On May 1, the corporation borrowed $85,000 from a bank by signing a 10 percent interest -bearing note per year due three years from May 1. Record the journal entries on May 1, the interest payment 3 months later and any journal entries needed on December 31st. Interest is paid semi-annually. (15 points). 3. Peterson Corporation had the following transactions during the year. Record the journal entries. (45 points) a. On Jan 10 issues 10,000 shares of common stock for cash at $7 per share. The par value is $4 per share b. On Mar 1, Issued 2,000 shares of preferred stock at $15 per share. Par value is $10 per share and the dividend rate is 5%. c. Issued 4,000 shares of common stock in exchange for land valued at $25,000 on July 31st. d. Purchased 500 shares of treasury stock (common stock) at $8 per share on August 30th. e. Sold 300 shares of treasury stock at $6 per share on November 1st. f. Paid a 10% stock dividend to outstanding common shareholders on December 31st. Fair value of stock is $10 per share. g. Paid a cash dividend of $5 per share of common stock. h. Prepare the stockholder section of the Balance sheet if retained earnings are $850,000. 4. On March 1st, 2011 a company issued 800 of $100 bonds, each convertible into 4 shares of common stock at $10 par value. On December 31, the company converted the bonds into common stock when the unamortized discount was $10,000. Record the conversion of the stock. (10 points). 5. During 2011, The company has net income of $1,400,000, convertible bonds of $1,000,000 ($1,000 per bond with a 6% coupon rate) into 5 shares of common stock each (par value $5), has common stock of $2 million purchased on January 2010. On April 30th, the company bought back 2,000 shares of common stock at a price of $8 per share. Compute EPS and Diluted EPS. Tax rate is 40%. (15 points).
Question 2
he following selected transactions are from Ohlde Company: 2010 Dec. 16 Accepted a $9,600, 60-day, 9% note dated this day in granting Todd Duke a time extension on his past-due account receivable. 31 Made an adjusting entry to record the accrued interest on the Duke note. 2011 Feb. 14 Received Duke?s payment of principal and interest on the note dated December 16. Mar. 2 Accepted an $4,120, 8%, 90-day note dated this day in granting a time extension on the past-due account receivable from Mare Co. 17 Accepted a $2,400, 30-day, 7% note dated this day in granting Jolene Halaam a time extension on her past-due account receivable. Apr. 16 Halaam dishonored her note when presented for payment. June 2 Mare Co. refuses to pay the note that was due to Ohlde Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Mare Co.?s accounts receivable. July 17 Received payment from Mare Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 8%. Aug. 7 Accepted an $5,440, 90-day, 10% note dated this day in granting a time extension on the past-due account receivable of Birch and Byer Co. Sept. 3 Accepted a $2,080, 60-day, 10% note dated this day in granting Kevin York a time extension on his past-due account receivable. Nov. 2 Received payment of principal plus interest from York for the September 3 note. Nov. 5 Received payment of principal plus interest from Birch and Byer for the August 7 note. Dec. 1 Wrote off the Jolene Halaam account against Allowance for Doubtful Accounts. Required: Prepare journal entries to record these transactions and events.
Question 3
The following is an auditor?s report prepared in accordance with International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB): INDEPENDENT AUDITOR?S REPORT To the Shareholders of Les Meridian, Inc. We have audited the accompanying financial statements of Les Meridian, Inc., which comprise the balance sheet as of December 31, 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management?s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor?s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor?s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity?s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity?s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Les Meridian, Inc. as of December 31, 2009, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Bergen and Bergen, CPAs February 20, 2010 19 Rue de Bordeaux Marseille, France a. For each of the seven distinct parts of the standard unqualified report prepared in accordance with generally accepted auditing standards in the United States, describe whether key elements of each of those seven parts are present in the audit report based on International Standards on Auditing for Les Meridian?s financial statements. b. Describe elements in the audit report based on International Standards on Auditing that are more extensive than an audit report based on U.S. auditing standards.
Question 4
Company: Limited Brands, Inc. Use SEC Form 10-K for reference retrieved from sec.gov Prepare a memo: Memo should be at least 5 pages Include in the memo the following steps: 1. A brief description of the company, including the history of the company. The Subject Organization can be any company, public or private, including not-for-profit organizations. 2. A clear statement that the potential client should, or should not be accepted. State your conclusions in the first paragraph of the report. Say something such as: ?For the reasons given below, I recommend that we accept (or do not accept) ABC Co. as an audit client.? 3. Give a brief introductory statement describing the company, its history, and its industry. One or two paragraphs should be enough. This introductory statement should be one page long at the most. 4. The Independent Status of the Board of Directors a. List the first five members of the Board of Directors by name. For these five members, list their full-time employer. Look at all the members of the Board of Directors and count how many do not work for the Target Company. State your findings, such as ?Twenty-one of the twenty-five members of the Board of Directors would be considered to be Independent Members by the SEC rules.? 5. State whether or not all the members of the Audit Committee are Independent. Give the name of the Chairperson of the Audit Committee. 6. If the client is a public client, the date and purpose of the latest Financial Statement 8-K filing should be given. Specify by date filed the most recent Form 8-K filled by the company. State the subject of the 8-K. (This requirement does not apply if your target company is not a public company) 7. Do not include the financial statements ? just the ratios that you think are relevant. Include ratios of a competitor, or of the industry. In addition: Avoid the temptation to cut-and-paste voluminous introductory material and Supporting Schedules to Income Statements from the 10-K. I prefer basic statements and your own paraphrases of the Introductory comments. State your conclusion very early in the report, using words such as ?For the reasons given below, I recommend that we accept (or do not accept) ABC Co. as an audit client.? List only the top five officers of the Company and list only the first five members of the Board of Directors. For these five members, list their full-time employer. Look at all the members of the Board of Directors and count how many do not work for the Target Company. State your findings , such as ?Fifteen of the twenty-five members of the Board of Directors would be considered to be Independent Members by the SEC rules.? Specify by date filed the most recent Form 8-K filled by the Company. State the subject of the 8-K. Be sure to include a comparison of selected (you do the selecting) financial statement ratios of the Target Company to either the Industry Averages or to at least one competitor. This information is available on the Internet. State the importance of each ratio and how your Target Company compares ? don?t just give the ratios.
Question 5
Please could you help me solve this problem? Thank you Mike and Nancy are equal shareholders in MN Corporation, an S corporation. The corporation, Mike, and Nancy are calendar-year taxpayers. The corporation has been an S corporation during its entire existence and thus has no accumulated E&P. The shareholders have no loans to the corporation. The corporation incurred the following items in the current year: Sales $300,000 Cost of goods sold 140,000 Dividends on corporate investments 10,000 Tax-exempt interest income 3,000 Section 1245 gain (recapture) on equipment sale 22,000 Section 1231 gain on equipment sale 12,000 Long-term capital gain on stock sale 8,000 Long-term capital loss on stock sale 7,000 Short-term capital loss on stock sale 6,000 Depreciation 18,000 Salary to Nancy 20,000 Meals and entertainment expenses 7,800 Interest expense on loans allocable to: Business debt 32,000 Stock investments 6,400 Tax-exempt bonds 1,800 Principal payment on business loan 9,000 Charitable contributions 2,000 Distributions to shareholders ($15,000 each) 30,000 Task(s): a. Compute the S corporation?s ordinary income and separately stated items. b. Show Mike?s and Nancy?s shares of the items in Part a. c. Compute Mike?s and Nancy?s ending stock bases, assuming their beginning balances are $100,000 each. When making basis adjustments, apply the adjustments in the order outlined on pages C:11-24 and C:11-25 of the text.
