Question

1. ABC COMPANY PURCHASED $500,000 BONDS IN XYZ COMPANY 2. ABC COMPANY PURCHASED $500,000 STOCK IN XYZ COMPANY 3. ABC COMPANY PURCHASED 5,000 SHARES OF ITS OWN COMMON STOCK FOR ITS TREASURY. THE PAR VALUE IS $3/SH AND THE SELLING PRICE IS $100/SH BASED ON 3. ABOVE, ABC COMPANY SOLD 1,000 SHARES OF ITS TREASURY STOCK FOR $102/SH 5. ABC COMPANY ISSUED 10,000 SHARES OF ITS COMMON STOCK FOR CASH. PV IS $3/SH AND THE SELLING PRICE IS $99/SH 6. ARC COMPANY ISSUED 10,000 SHARES OF ITS COMMON STOCK IN ITS PURCHASE OF LAND. LAND'S ASKING PRICE IS $500,000 LAND'S SELLING PRICE IS $450,000 PV OF STOCK IS $3/SH SELLING PRICE OF STOCK IS $46/SH 7. ABC COMPANY PAID ITS ATTORNEY $20,000 TO INCORPORATE BUSINESS 8. ABC COMPANY ISSUED $400,000 BONDS FOR 97 9. ABC COMPANY ISSUED $400,000 BONDS FOR 102 0 2 10. ABC COMPANY DECLARED A Z FOR 1 STOCK SPLIT WHEN PV WAS $3/SH AND THE NUMBER OF SHARES OUTSTANDING WAS 100,000 11. ABC COMPANY DECLARED A 5% STOCK DIVIDEND. PV IS $1.50/SH AND THERE ARE 200.000 SHARES OF COMMON STOCK OUTSTANDING AND THE SELLING PRICE IS $46/SH 12. DATE OF RECORD FOR 11. ABOVE 13. ISSUED STOCK DIVIDENDS FROM 11. ABOVE 14. DECLARED A $2 CASH DIVIDEND. THERE ARE 210,000 SHARES OF COMMON STOCK OUTSTANDING. THE COMMON STOCK HAS A $1.50 PAR VALUE PER SHARE AND THE STOCK'S SELLING PRICE IS $46/SH 15. DATE OF RECORD FOR 14. ABOVE 16. PAID 14. ABOVE 17. ON 7/1. RECEIVED INTEREST FROM INVESTMENT YOU PURCHASED. THE ORIGINAL INVESTMENT WAS FOR $300,000, PAYING 10% INTEREST SEMI ANNUALLY ON 7/1 AND 1/1. PREPARE THE JOURNAL ENTRY FOR 7/1 18. BASED ON 17 ABOVE, PREPARE THE JOURNAL ENTRY ON 12/31 19. BASED ON 17 ABOVE, PREPARE THE JOURNAL ENTRY ON 1/1 20. CLOSED OUT 5400,000 NET INCOME 21. REALIZED UNDERSTATED DEPRECIATION EXPENSE LAST YEAR BY $2,000 joumal entries

Answer 1

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Debit 500,000 Credit Explanation 500,000 Ref Dr. / Cr. Account Title 1 Dr Investment in Bonds Cr Cash (To record purchase of bond) Investment in XYZ company Cash (To record investment in stock of XYZ company) Treasury Stock 2 Dr 500,000 Cr 500,000 500,000 5000 shares @ $ 100/sh Cash 500,000 102,000 (To record purchase of its own stock) Cash Treasury Stock Additional paid in capital-common stock (to record sale of treasury stock) 1000 shares @ $ 102/sh 100,000 1000 shares @ $ 100/sh 2,000 1000 shares @ $ 2/sh Cash 990,000 10,000 shares @ $ 99/sh 30,000 10,000 shares @ Par value of $ 3/sh 960,000 10,000 shares @ $ 96/sh 450,000 Paid in capital - Common stock Additional paid in capital-common stock (To record issuance of shares) Land Paid in capital - Common stock Additional paid in capital-common stock (To record issuance of shares against purchase of land) Legal and professional fees Cash (To record payment of attorney fees) Selling price of land 30,000 10,000 shares @ Par value of $ 3/sh 420,000 balancing figure 20,000 20,000 Cash 400,000 Discount on Bond Payable Bond Payable (To record bond issued at discount) 12,000 balancing figure 388,000 $ 400,000 / 100 * 97 9 Dr Cash 400,000 8,000 Premium on Bond Payable Bond Payable (To record bond issued at premium) balancing figure 408,000 $ 400,000 / 100 * 102 10 No journal entry required; instead memo will be recorded to note change in the number of shares and par value of share; That is, after 2for1 stock split, issued and outstanding shares would be 200,000 shares (100,000 *multiply by 2) and par value of issued shares becomes $ 1.5 per share ($ 3 divided by 2) Thus total value of capital account remains unchanged.

Ref Dr. / Cr. Account Title Debit Credit Explanation 11 Dr Retained Earnings 460,000 200000 shares * 5% * $ 46 /sh I cr Common stock dividend distributable 15,000 200000 shares * 5% * $ 1.5 /sh I Tar Additional paid in capital-common stock 445,000 balancing figure (To record declaration of stock dividend) 12 No journal entry required; instead record will be issued to stock holders regarding declaration of dividend and payment date of dividend. 13 Dr Common stock dividend distributable 15,000 Cr Paid in capital - Common stock 15,000 (To record payment of stock dividend) 14 Dr Retained Earnings 420,000 210,000 shares @ $2per share I cr Dividend Payable 420,000 210,000 shares @ $2per share (To record declaration of cash dividend of $ 2 per share) 15 No journal entry required; instead record will be issued to stock holders regarding declaration of dividend and payment date of dividend. 16 Dr Dividend Payable 420,000 Cr Cash 420,000 (To record payment of cash dividend) 17 Dr Cash 15,000 ($300,000 * 10%)/2 (semi annual payments) I Tar Interest Income 15,000 (To record interest received on investment) 18 Dr Interest Receivable 15,000 ($300,000 * 10%)/2 (semi annual payments) Cr Interest Income 15,000 (To record accrual of interest receivable) 19 Dr Cash 15,000 Cr Interest Receivable 15,000 (To record interest received on investment, accrued during YE) 20 Dr Net Income (or) Income summary (or) Profit and loss a/c 400,000 Cr Retained Earnings 400,000 (to record year end closing entry to transfer net income to retained earnings) 21 Dr Prior period adjustment a/c (or) Profit & Loss adjustment a/c 2,000 I cr Accumulated Depreciation 2,000 (To record prior period understatment of depreciation expense)