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Pretia
Recognizing Differences
Write a 350- to 500-word paper in which you differentiate between valuation, depreciation, amortization, and depletion. Is it appropriate to calculate depreciation using two different methods? Why?
Format your paper with the APA format guidelines
Must have at least 2 creditable references and in-text citations
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Individual
Exercises and Problems – Week Four
Resource: Ch. 10 of Financial Accounting
Complete Exercises E10-6, E10-8, & E10-18.
Complete Problems 10-3A & 10-6A.
Submit as a Microsoft® Excel® or Word document.
E10-6 According to the accountant of Ulner Inc., its payroll taxes for the week were as fol- lows: $198.40 for FICA taxes, $19.84 for federal unemployment taxes, and $133.92 for state unemployment taxes.
Instructions
Journalize the entry to record the accrual of the payroll taxes.
E10-8 Jim Thome has prepared the following list of statements about bonds.
1. Bonds are a form of interest-bearing notes payable.
2. When seeking long-term financing, an advantage of issuing bonds over issuing common
stock is that stockholder control is not affected.
3. When seeking long-term financing, an advantage of issuing common stock over issuing
bonds is that tax savings result.
4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds.
5. Secured bonds are also known as debenture bonds.
6. Bonds that mature in installments are called term bonds.
7. A conversion feature may be added to bonds to make them more attractive to bond buyers.
8. Therateusedtodeterminetheamountofcashinteresttheborrowerpaysiscalledthestatedrate.
9. Bond prices are usually quoted as a percentage of the face value of the bond.
10. The present value of a bond is the value at which it should sell in the marketplace.
Instructions
Identify each statement above as true or false. If false, indicate how to correct the statement.
*E10-18 Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for $562,613. This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize bond premium or discount.
Instructions
Prepare the journal entries to record the following. (Round to the nearest dollar.)
(a) The issuance of the bonds.
(b) The payment of interest and the discount amortization on July 1, 2011, assuming that interest
was not accrued on June 30.
(c) The accrual of interest and the discount amortization on December 31, 2011.
P10-3A On May 1, 2011, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2011, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31.
Instructions
(a) Prepare the journal entry to record the issuance of the bonds.
(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2011.
(c) Show the balance sheet presentation on December 31, 2011.
(d) Prepare the journal entry to record payment of interest on May 1, 2012, assuming no accrual
of interest from January 1, 2012, to May 1, 2012.
P10-6A On July 1, 2011, Atwater Corporation issued $2,000,000 face value, 10%, 10-year bonds at $2,271,813. This price resulted in an effective-interest rate of 8% on the bonds. Atwater uses the effective-interest method to amortize bond premium or discount. The bonds pay semi- annual interest July 1 and January 1.
Instructions
(Round all computations to the nearest dollar.)
(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2011.
(b) Prepare an amortization table through December 31, 2012 (3 interest periods) for this bond
issue.
(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium
on December 31, 2011.
(d) Prepare the journal entry to record the payment of interest and the amortization of the
premium on July 1, 2012, assuming no accrual of interest on June 30.
(e) Prepare the journal entry to record the accrual of interest and the amortization of the
premium on December 31, 2012.
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