Question Description

(5 points each for a possible total of 10 points) 1. After several years of business, Abel, Barney, and Cole are liquidating. The following are post-closing account balances. Cash 18,000 Inventory 73,000 Other assets 157,000 Accounts Payable 61,000 Abel, Capital 50,000 Barney, Capital 50,000 Cole, Capital 87,000 Noncash assets are sold for $275,000. Profits and losses are shared equally. After all liabilities are paid, divide the remaining cash amongst the partners. 76 PRINCIPLES OF ACCOUNTING 2 2. The partnership of Brandon and Ryan is being liquidated. All gains and losses are shared in a 3:1 ratio, respectively. Before liquidation, their balance sheet balances are as follows: Cash $10,000 Other Assets 8,000 Liabilities 4,000 Brandon, Capital 7,000 Ryan, Capital 7,000 a. If the Other Assets are sold for $10,000, how much will each partner receive before paying liabilities and distributing the remaining assets? b. If the Other Assets are sold for $8,000, how much will each partner receive before paying liabilities and distributing remaining assets? Part B (10 points each for a possible total of 20 points) 1. Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the future maturity of its bonds. During the first year, the fund earned $3,825. At the time of bond redemption, the fund has a balance of $417,000. Of this, $400,000 was used to redeem the bonds. Journalize the following entries. a. Initial deposit b. The first year’s interest c. The redemption of the bonds 2. On January 1, Auctions Online issued $300,000, 9%, 10-year bonds to lenders at the contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries. a. Issued the bonds b. Paid first semiannual interest payment c. Retired the bonds at maturity PRINCIPLES OF ACCOUNTING 2 77 Part C (10 points each for a possible total of 20 points) 1. Prepare a statement of retained earnings in proper form for White Corporation for the year ended December 31, 2012, from the following: Retained Earnings, January 1, 2012 $2,000 Dividends paid during the year 800 Net income for the year 3,000 Correction of prior year error. Purchase of land recorded as rent expense 1,000 2. Curtis Corporation’s balance sheet included the following: Common Stock, $5 par value, 5,000 shares issued and outstanding $25,000 Retained Earnings 20,000 Total Stockholders’ Equity $45,000 Prepare journal entries for the following transactions. May 3 Issued 500 shares at $6 per share 9 Reacquired 100 shares at $4 per share 15 Reissued 50 of the Treasury shares at $7 per share 17 Reissued 10 of the Treasury shares at $3 per share