Prepare journal entries with appropriate backup lead schedules Resolved



Prepare journal entries with appropriate backup lead schedules Resolved

Prepare journal entries with appropriate backup lead schedules
Resolved Question:
• Prepare journal entries with appropriate backup lead schedules for investments, inventory, fixed assets, and capital leases.
• Prepare appropriate note disclosures.

1. On January 1, 2006, Jamona Corp. purchased 12% bonds, having a maturity value of $300,000, for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2006, and mature January 1, 2011, with interest receivable December 31 of each year. The company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale. The fair value of the bonds at December 31 of each year is as follows:

• 2006 – $320,500
• 2007 – $309,000
• 2008 – $308,000
• 2009 – $310,000
• 2010 – $300,000

2. The following information is available from Jamona’s inventory records

; Units Unit Cost
January 1, 2007 (beginning inventory) 600 $ 8.00

January 5, 2007 &nb sp; 1,200 9.00
January 25, 2007 1,300 10.00
February 16, 2007 &nb sp; 800 11.00
March 26, 2007 &nb sp; 600 12.00

A physical inventory on March 31, 2007, shows 1,600 units on hand. Select any one of the inventory methods (LIFO, FIFO, Average Cost, or others).

3. On July 6, Jamona Corp. acquired the plant assets of Berry Company, which had discontinued operations. The appraised value of the property is:

Land $ 400,000
Building 1,200,000
Machinery and equipment 800,000
Total $2,400,000

Jamona Corp. gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market value of $168 per share on the date of the purchase of the property.

Jamona Corp. expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building.

Repairs to building $105,000
Construction of bases for machinery to be installed later 135,000
Driveways and parking lots 122,000
Remodeling of office space in building 161,000
Special assessment by city on land 18,000

On December 20, the company paid cash for machinery, $260,000, subject to a 2% cash discount, and freight on machinery of $10,500.

4. On January 1, 2007, Jamona Corp. signed a five-year non-cancelable lease for a machine. The terms of the lease called for Jamona to make annual payments of $8,668 at the beginning of each year, starting January 1, 2007. The machine has an estimated useful life of six years and a $5,000 un-guaranteed residual value. The machine reverts to the lessor at the end of the lease term. Jamona uses the straight-line method of depreciation for all of its plant assets. Jamona’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.


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