UMUC ACCt311 homework 1

| September 29, 2018

Acct311 Homework 1

On October 1, Eder Fabrication borrowed $60 million and
issued a nine-month, 12% promissory note. Interest was payable at maturity.
Prepare the journal entry for the issuance of the note and the appropriate
adjusting entry for the note at December 31, the end of the reporting period.

On October 1, Eder Fabrication borrowed $60 million and
issued a nine-month promissory note. Interest was discounted at issuance at a
12% discount rate. Prepare the journal entry for the issuance of the note and
the appropriate adjusting entry for the note at December 31, the end of the
reporting period.

On July 1, Orcas Lab issued a $100,000, 12%, 8-month note.
Interest is payable at maturity. What is the amount of interest expense that
should be recorded in a year-end adjusting entry if the fiscal year-end is (a)
December 31? (b) September 30?

Branch Corporation issued $12 million of commercial paper on
March 1 on a nine-month note. Interest was discounted at issuance at a 9%
discount rate. Prepare the journal entry for the issuance of the commercial
paper and its repayment at maturity.

Life.com issued $10 million of commercial paper on
April 1 on a nine-month note. Interest was discounted at issuance at a 6%
discount rate. What is the effective interest rate on the commercial paper?

On December 12, 2013, Pace Electronics received $24,000 from
a customer toward a cash sale of $240,000 of diodes to be completed on January
16, 2014. What journal entries should Pace record on December 12 and January
16?

Consider the
following liabilities of Future Brands, Inc., at December 31, 2013, the
company’s fiscal year-end. Should they be reported as current liabilities or
long-term liabilities?
1. $77 million of 8%
notes are due on May 31, 2017. The notes are callable by the company’s bank,
beginning March 1, 2014.
2. $102 million of 8%
notes are due on May 31, 2018. A debt covenant requires Future to maintain a
current ratio (ratio of current assets to current liabilities) of at least 2 to
1. Future is in violation of this requirement but has obtained a waiver from
the bank until May 2014, since both companies feel Future will correct the
situation during the first half of 2014.

Right Medical
introduced a new implant that carries a five-year warranty against
manufacturer’s defects. Based on industry experience with similar product
introductions, warranty costs are expected to approximate 1% of sales. Sales
were $15 million and actual warranty expenditures were $20,000 for the first
year of selling the product. What amount (if any) should Right report as a
liability at the end of the year?

Skill Hardware is the
plaintiff in a $16 million lawsuit filed against a supplier. The litigation is
in final appeal and legal counsel advises that it is virtually certain that
Skill will win the lawsuit and be awarded $12 million. How should Skill account
for this event?

Bell International
can estimate the amount of loss that will occur if a foreign government
expropriates some company property. Expropriation is considered reasonably
possible. How should Bell report the loss contingency?

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