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Illustration: Z-Smith Company purchased $100,000 of 8 percent bonds of Bush Corporation on January 1, 2016, at a discount, paying $92,278. The bonds mature January 1, 2021 and yield 10%; interest is payable each July 1 and January 1. Z-Smith records the investment as follows: January 1, 2016
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Illustration: Moore Corporation has outstanding 2,000, $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2017, when the unamortized discount is $30,000 and the market price of the stock is $21 per share. Prepare the entry to record the conversion of the bonds.
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Illustration: Blue Diamond Corporation issued 300 shares of $10 par value common stock for $4,500. Prepare the journal entry to record the issuance of the shares. Cash 4,500 Common Stock (300 x $10) 3,000 Paid-in Capital in Excess of Par Value
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Issuance and marketing of bonds to the public: Usually takes weeks or months. Issuing company must Arrange for underwriters. Obtain SEC approval of the bond issue, undergo audits, and issue a prospectus. Have bond certificates printed.
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Sept. 1 - Purchased inventory from Orion Company on account for $50,000. Darby records purchases gross and uses a periodic inventory system. Oct. 1 - Issued a $50,000, 12-month, 8% note to Orion in payment of account. Oct. 1 - Borrowed $75,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $81,000 note.
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Indefinite-Life Intangibles No foreseeable limit on time the asset is expected to provide cash flows. Must test indefinite-life intangibles for impairment at least annually. No amortization.
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llustration—(Four Methods): Maserati Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $150,000. The company estimated that the machine would have a salvage value of $24,000 at the end of its service life. Its life is estimated at 5 years and its working hours are estimated at 21,000 hours....
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Improvements with limited lives, such as private driveways, walks, fences, and parking lots, are recorded as Land Improvements and depreciated. Land acquired and held for speculation is classified as an investment. Land held by a real estate concern for resale should be classified as inventory.
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All companies need periodic verification of the inventory records by actual count, weight, or measurement, with counts compared with detailed inventory records. Companies should take the physical inventory near the end of their fiscal year, to properly report inventory quantities in their annual accounting reports.
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We have learned that companies report both cash and cash equivalents as cash on their balance sheets. But where do they park cash that is not used to pay for inventory, employees, or other expenses? As shown in the chart to the right, companies plow the largest portion of their cash holdings into corporate debt. As indicated, corporate debt is the ...
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