Chapter 13: Q2Q (page 658)
Question: What purpose does the variety in bond features (types and characteristics) serve?
Answer:
Variety in bond features helps investors reduce their risk and generate a high yield.
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Consider the bond investment by Lady Gaga in IFRS17-5. Discuss the accounting for this investment if Lady Gaga’s
Business model is to hold the investment to collect interest while outstanding and to receive the principal at maturity.
Question: E13-1 (L01) (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (j) Premium offers outstanding. (b) Estimated taxes payable. (k) Discount on notes payable. (c) Service warranties on appliance sales. (l) Personal injury claim pending. (d) Bank overdraft. (m) Current maturities of long-term debts to be paid (e) Employee payroll deductions unremitted. from current assets. (f) Unpaid bonus to officers. (n) Cash dividends declared but unpaid. (g) Deposit received from customer to guarantee (o) Dividends in arrears on preferred stock. performance of a contract. (p) Loans from officers. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed.
(Fair Value Measurement Issues) Assume the same information as in E17-19 for Lilly Company. In addition,
assume that the investment in the Woods Inc. stock was sold during 2018 for \(195,000. On December 31, 2018, the following
information relates to its two remaining investments of common stock.
Cost Fair Value
(at purchase date) (at December 31)
Investment in Arroyo Company stock \)100,000 \(140,000
Investment in Lee Corporation stock 250,000 310,000
Total \)350,000 \(450,000
Net income before any security gains and losses for 2018 was \)905,000.
Instructions
(a) Compute the amount of net income or net loss that Lilly should report for 2018, taking into consideration Lilly’s securitytransactions for 2018.
(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock atDecember 31, 2018.
What is the nature of a “discount: on notes payable?
(Multiple-Step and Single-Step Statements) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2017 information related to P. Bride Company (\(000 omitted).
Administrative expense
Officers’ salaries \)4,900
Depreciation of office furniture and equipment \(3,960
Cost of goods sold \)60,570
Rent revenue \(17,230
Selling expense
Delivery expense \)2,690
Sales commissions \(7,980
Depreciation of sales equipment \)6,480
Sales revenue \(96,500
Income tax \)9,070
Interest expense $1,860
Instructions
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