224sp10_final1

# 224sp10_final1 - MISCH SPRING 2010 FINANCIAL ACCOUNTING...

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MISCH NAME_____________________________ SPRING 2010 FINANCIAL ACCOUNTING FINAL EXAM PROBLEM POSSIBLE POINTS ACTUAL POINTS 1. Bonds Payable 22 2. Dividends 08 3. Transaction Analysis 12 4. Time Value of Money 06 5. Basic and Adjusting Journal Entries and Financial Statements 64 6. Multiple Choice 06 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 and cell phones are prohibited on this examination. Use of such items and/or possession of any unauthorized materials will result in your receiving a zero on the examination. E. Good Luck! Have a wonderful summer holiday! 1

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PART I—BONDS PAYABLE (22 POINTS) On January 2, 2009, Covalent Corporation issued \$250,000 of 8-year, 5.4% bonds for \$277,155. On the date of issuance, the market interest rate for bonds on similar risk was 3.8%. The bonds pay interest annually each December 31 st . Covalent has a calendar year-end and uses the effective interest method of amortization. Required: A. Prepare the journal entry required on Covalent’s books on January 2, 2009 to record the issuance of the bonds. (4 Points) DATE ACCOUNT DEBIT CREDIT B. Prepare a bond amortization table through December 31, 2012. (4 Points) C. Prepare, in good form, the balance sheet presentation related to the bonds that would appear on Covalent’s books at December 31, 2009. (Ignore cash.) (3.5 points) 2
PART I CONTINUED (BONDS PAYABLE) D. Prepare any journal entry/entries required on Covalent’s books at December 31, 2011. (4 Points) DATE ACCOUNT DEBIT CREDIT E. Assume that on January 2, 2012 , Covalent redeemed the bonds at 103. Prepare the journal entry required on the company’s books to record the redemption. (5 Points) DATE ACCOUNT DEBIT CREDIT F. Prepare, in good form, the income statement presentation related to the bonds that would appear on Covalent’s books for 2012 , assuming that the redemption took place as noted in part (E) above. (1.5 Points) 3

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PART II—DIVIDENDS (8 POINTS) On December 13, 2009, the board of directors of Ionic Corporation declared a cash dividend of \$1,800,000, payable on December 30, 2009 to stockholders of record on December 24 th . At December 31, 2008 , the company’s dividends were two years in arrears. Ionic had the following balances in its stockholders’ equity accounts during 2009: Preferred Stock, 8%, \$100 par value \$ 450,000 Common Stock, \$2 par value \$ 1,550,000 Additional Paid-in Capital—Preferred Stock \$ 500,000 Additional Paid-in Capital—Common Stock \$ 1,000,000 Retained Earnings \$
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## This note was uploaded on 04/25/2011 for the course ACCT 224 taught by Professor None during the Spring '09 term at City College of San Francisco.

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224sp10_final1 - MISCH SPRING 2010 FINANCIAL ACCOUNTING...

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