| 12 | . On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824, |
| which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. |
| Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used. |
| Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the |
| investment account. | | | | | | | |
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| 13. | ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, |
| prepare the entry to record bad debt expense. | | | | | |
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| 14 | On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make |
| annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 |
| unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method |
| of depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet |
| been made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal |
| entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for |
| this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.) |
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| 15 | ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension |
| plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014. |
| Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry. |
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| Pension asset/liability (January 1) | $0 | | | | | |
| Actual return on plan assets | $40,000 | | | | | |
| Expected return on plan assets | $20,000 | | | | | |
| Contributions (funding) in 2014 | $37,000 | | | | | |
| Fair value of plan assets (December 31) | $75,000 | | | | | |
| Settlement rate | | 10% | | | | | |
| Projected benefit obligation (January 1) | $0 | | | | | |
| Service cost | | $60,000 | | | | | |
| Benefits paid in 2014 | | $0 | | | | | |
| *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature. |
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| 16 | On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of |
| $10 per share on December 31, 2014. Additional information is as follows: | | | |
| | a. The service period related to the restricted stock is 2 years. | | | |
| | b. Vesting occurs if the CFO stays with the company for a two-year period. | | |
| | c. The par value of the common stock is $3 per share. | | | | |
| Make the appropriate accounting entry as of the grant date, 12/31/14. Note: use the alternative method as described in your textbook for deferred compensation. |
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| Do this step after preparing the Income Statement except for the Income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense) |
| 17 | Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. |
| However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full |
| on the return's March 15, 2015 due date. | | | | | | |
| ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600, |
| so January through November income tax expense recognized amounts to $63,800 (11/12 months). | | |
| Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents | |
| tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities. | |
| Based on the income before income taxes figure from the income statement, record December's income tax expense |
| so that the entire year's total tax expense is correct. | | | |
