Exercise 1- Apply fair market value method to marketable equity securities (L.O. 2)
Corbit Company has marketable equity securities that have a fair market value at year-end that is $13,440 below their cost. Give the required entry if:
a. The securities are current assets classified as trading securities.
b. The securities are noncurrent assets classified as available-for-sale securities, and the loss is considered to be temporary.
c. The securities are noncurrent assets classified as available-for-sale securities, and the loss is considered to be permanent.
State where each of the accounts debited in a, b, and c would be reported in the financial statements.
Exercise 2- Compute bond interest expense; show how bond price was determined.
On December 31, 2011, East Lansing Office Equipment Company issued $1,600,000 face value of 8%, 10-year bonds for cash of $1,400,605, a price to yield 10%. The bonds pay interest semiannually and mature on December 31, 2021.
a. State which is higher, the market rate of interest or the contract rate.
b. Compute the bond interest expense for the first six months of 2012, using the interest method.
c. Show how the $1,400,605 price must have been determined.
Exercise 3
Perform horizontal and vertical analysis.
Income statement data for Boston Company for 2013 and 2012 follow:
|
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2013
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2012
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Net sales
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$2,610,000
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$1,936,000
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|
Cost of goods sold
|
1,829,600
|
1,256,400
|
|
Selling expenses
|
396,800
|
350,000
|
|
Administrative expenses
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234,800
|
198,400
|
|
Federal income taxes
|
57,600
|
54,000
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Prepare a horizontal and vertical analysis of the income data in a form similar to Illustration. Comment on the results of this analysis.
Exercise 4- Compute cost of goods sold
Gore Company makes products for sporting events. The following data are for the year ended December 31, 2014:
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Materials inventory, January 1, 2014
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$ 45,000
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Materials inventory, December 31, 2014
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65,000
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Materials purchases
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175,000
|
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Direct labor
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225,000
|
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Work in process inventory, January 1, 2014
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30,000
|
|
Work in process inventory, December 31, 2014
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40,000
|
|
Manufacturing overhead
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130,000
|
|
Finished goods inventory, January 1, 2014
|
80,000
|
|
Finished goods inventory, December 31, 2014
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140,000
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Prepare a Cost of Goods Manufactured Statement and compute the cost of goods sold.