29 Jun Question 1) On February 2, 2011
Question
1) On February 2, 2011 MBH, Inc acquired 30% of the voting common stock of Construction Corporation as a long term investment. Data from Construction Corporation financial statements for the year ended December 31, 2011 include the following:
Net Income $150,000
Dividends $75,000
Require; prepare any necessary journal entries for MBH at December 31, 2011, under the equity method of accounting for investment.
2) The following selected transaction relate to liabilities of Chicago Glass Corporation for 2011. Chicago fiscal year ends on December 31.
On January 15, Chicago received $7,000 from Henry Construction toward the purchase of $66,000 of plate glass to be delivered on February 6.
On February 3, Chicago received $ 6,700 of refundable deposit relating to containers used to transport glass components.
On February 6, Chicago delivered the plate glass to Henry construction and received the balance of the purchase.
First quarter credit sales totaled $700,000. The state sales tax rate is 4% and the local sales tax rate is 2%
Required; prepare journal entries for the above transactions.
3) On January 1, 2011, Mania Enterprises issued 12% bonds dated January 1, 2011, with a face amount of $20 million. The bonds mature in 2020 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
Required
Determine the price of the bond at January 1, 2011
Prepare the journal entry to record the bond issuance by Mania on January 1, 2011.
Prepare the journal entry to record interest on June 30, 2011, using the effective interest method.
Prepare the journal entry to record interest on December 31, 2011, using the effective interest method.
4) Diablo Company leased a machine from Juniper Corporation on January 1, 2011; the machine has a fair value of $20,000,000. The lease agreement call for four equal payments at the end of each year the useful life of the machine was expected to be four years with no residual value. The appropriate interest rate for this lease is 10%.
Additional Information
PV of an ordinary annuity @10% for 4 periods 3.16987
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