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Fall 2006 Final exam

Fall 2006 Final exam - MISCH FALL 2006 FINANCIAL ACCOUNTING...

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MISCH NAME_____________________________ FALL 2006 FINANCIAL ACCOUNTING FINAL EXAM PROBLEM POSSIBLE POINTS ACTUAL POINTS 1. Bonds Payable 21 2. Basic and Adjusting Journal Entries and Financial Statements 64 3. Time Value of Money 06 4. Dividends 08 5. Treasury Stock 10 6. Multiple Choice 09 7. Quibble Point 02 ---------- Total 120 NOTE: A. If you are asked for an entry or an amount when none is required, write “no entry” or “zero” in the space provided. B. Round all answers to the nearest dollar. C. Partial credit will be given only when supporting computations are shown in good form. D. Calculators with stored-text capabilities are prohibited on this examination. Use of such calculators and/or possession of any unauthorized materials will result in your receiving a zero on the examination. E. Good Luck! Have a great Christmas holiday! 1

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PART I—BONDS PAYABLE (21 POINTS) On January 2, 2005, Kris Kringle Corporation issued \$150,000 of 9.2%, 5-year bonds for \$154,138 at a time when bonds of similar risk were yielding 8.5% on the market. Interest is payable annually each December 31 st . The company uses the effective interest method of amortization, and has a calendar year-end. Required: A. Prepare the journal entry required on Kris Kringle’s books on January 2, 2005 to record the issuance of the bonds. (4 Points) DATE ACCOUNT DEBIT CREDIT B. Prepare a bond amortization table through December 31, 2008 . (3.5 Points) C. Prepare the balance sheet presentation related to the bonds that would appear on Kris Kringle’s books at December 31, 2005 . (Ignore cash.) (2.5 points) 2
PART I CONTINUED (BONDS PAYABLE) D. Prepare any journal entry/entries required on Kris Kringle’s books at December 31, 2006. (4 Points) DATE ACCOUNT DEBIT CREDIT E. Assume that on January 2, 2007 , Kris Kringle redeemed the bonds at 101. Prepare the journal entry required on Kris Kringle’s books to record the redemption. (5 Points) DATE ACCOUNT DEBIT CREDIT F. Briefly explain one reason that a company might choose to redeem a bond before maturity. (2 Points) 3

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PART II—JOURNAL ENTRIES AND FINANCIAL STATEMENTS (64 POINTS) Santa Claus Incorporated’s February 28, 2006 trial balance had the following accounts, all with normal balances: ACCOUNT BALANCE Accounts Payable 54,200 Accounts Receivable 90,000 Accumulated Depreciation 37,500 Additional Paid-in Capital—Common Stock 26,900 Additional Paid-in Capital—Treasury Stock 2,700 Allowance for Bad Debts 3,700 Cash 88,000 Common Stock 147,000 Inventory, 1/1/06 212,000 Machinery 110,000 Office Supplies 4,100 Payroll Tax Expense 6,300 Purchases
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Fall 2006 Final exam - MISCH FALL 2006 FINANCIAL ACCOUNTING...

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