Accounting - short answers and problems

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Business Finance

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1. The Coca-Cola Corporation purchased North America Coca-Cola Enterprise (CCE); how does Coca-Cola Corporation benefit from this purchase? Consider Distribution Channels and Product Mix. Product Mix relates to the mix of products produced and sold, such as soft drinks, water, sport drinks, etc. 2. Identify the three categories of debt securities and describe the accounting and reporting treatment for each category. 2-1 What are a few examples of Debt Securities? 3. Explain who uses derivatives and why. What are the basic guidelines for accounting for derivatives? 3-1 Provide a few examples of using a derivative as a hedge? 4. Identify the categories of equity securities and describe the accounting and reporting treatment for each category. 4-1 what is the purpose or why do we treat Equity Holdings in this manner? What is the purpose? 5. Investments must be evaluated each period to determine if an Impairment of the Investment has occurred. Describe the difference between a Temporary Impairment and Other Than Temporary Impairment. If the security is written-down, can a write-up occur in the future? Exercise 123 On January 2, 2018, Tylor Company issued a 4-year, $550,000 note at 6% fixed interest, interest payable semiannually. Tylor now wants to change the note to a variable rate note. As a result, on January 2, 2018, Tylor Company enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.6% for the first 6 months on $550,000. At each 6-month period, the variable interest rate will be reset. The variable rate is reset to 6.7% on June 30, 2018. Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2018. $ Net interest expense Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2018. $ Net interest expense Brief Exercise 17-13 Presented below are two independent cases related to available-for-sale debt investments. Case 1 Case 2 $39,040 $98,900 Fair value 28,350 108,290 Expected credit losses 22,930 91,580 Amortized cost For each case, determine the amount of impairment loss, if any. (If no loss, please enter 0. Do not leave any fields blank.) Case 1 Impairment Loss $ Case 2 Impairment Loss $ Exercise 122 The following information is available for Irwin Company for 2018: $127,000 Net Income Realized gain on sale of available-for-sale debt securities 12,000 Unrealized holding gain arising during the period on available-for-sale debt securities 31,000 Reclassification adjustment for gains included in net income 7,500 (a) Determine other comprehensive income for 2018. $ Other comprehensive income Brief Exercise 17-2 Blue Company purchased, on January 1, 2017, as an available-for-sale security, $65,000 of the 8%, 5-year bonds of Chester Corporation for $60,072, which provides an 10% return. Prepare Blue’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $61,750. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) (b) (c) Exercise 17-3 (Part Level Submission) On January 1, 2017, Marigold Company purchased 8% bonds having a maturity value of $240,000, for $260,219.71. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Marigold Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. (a) Prepare the journal entry at the date of the bond purchase. (Enter answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Brief Exercise 17-5 Wildhorse Corporation purchased 360 shares of Sherman Inc. common stock for $11,900 (Wildhorse does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share. Prepare Wildhorse’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) (b) (c) Brief Exercise 17-7 Pharoah Corporation purchased for $277,000 a 30% interest in Murphy, Inc. This investment enables Pharoah to exert significant influence over Murphy. During the year, Murphy earned net income of $183,000 and paid dividends of $64,000. Prepare Pharoah’s journal entries related to this investment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record the purchase.) (To record the net income.) Exercise 17-18 Sarasota Corporation has municipal bonds classified as a held-to-maturity at December 31, 2017. These bonds have a par value of $865,000, an amortized cost of $865,000, and a fair value of $780,000. The company believes that impairment accounting is now appropriate for these bonds. Prepare the journal entry to recognize the impairment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record the impairment.) What is the new cost basis of the municipal bonds? New cost basis of the municipal bonds $ Given that the maturity value of the bonds is $865,000, should Sarasota Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? At December 31, 2018, the fair value of the municipal bonds is $816,000. Prepare the entry (if any) to record this information. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit
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