Question:
On January 1, 2023, ABC Corp. issued $1,000,000 of 10-year, 8% bonds at 98. The bonds pay interest semi-annually on June 30 and December 31. Prepare the journal entries to record the bond issuance and the first interest payment on June 30, 2023.
Question:
XYZ Corp. purchased new machinery for $500,000 on January 1, 2022. The machinery has an estimated useful life of 10 years and a residual value of $50,000. Prepare the journal entries to record the acquisition and depreciation expense for the first year using the straight-line method.
Solution:
Question:
ABC Corp. had the following inventory transactions during the year:
Beginning inventory: $100,000
Purchases: $500,000
Sales: $600,000
Ending inventory: $150,000 Calculate the cost of goods sold and the gross profit for the year.
Solution:
Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory Cost of Goods Sold = $100,000 + $500,000 - $150,000
Cost of Goods Sold = $450,000
Gross Profit = Sales - Cost of Goods Sold
Gross Profit = $600,000 - $450,000
Gross Profit = $150,000
Question:
On January 1, 2023, XYZ Corp. purchased 10% of the outstanding shares of ABC Corp. for $500,000. ABC Corp. reported net income of $200,000 for the year.
Record the investment in ABC Corp. using the equity method.
Solution:
Investment in ABC Corp. (10% * $500,000) 50,000
Equity in Earnings of ABC Corp. (10% * $200,000) 20,000
Cash (Initial investment) 500,000
Question:
On December 31, 2022, XYZ Corp. estimates that it will incur $100,000 in warranty expenses for its products sold during the year. However, based on historical data, the actual warranty expenses are typically 5% of sales. Record the adjusting entry for the estimated warranty expenses on December 31, 2022
Solution:
Since the actual warranty expenses are typically 5% of sales, the adjusting entry should reflect this estimation.
Adjusting Entry for Estimated Warranty Expenses:
Warranty Expense (5% * Sales) $100,000
Estimated Warranty Liability $100,000