BMGT220 Week 5 homework solutions
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To the side of each senario, record the three required journal entries for a purchase at par, a premium
purchase, and a purchase of bonds at discount. The first entry has been made for you.
Dorchester Inc. invested $100,000 in 5-year bonds issued by Ace Brick Company. The bonds were purchased at par on January 1, 20X1, and bear interest at a rate of 8% per annum, payable semiannually.
(a) Prepare the journal entry to record the initial investment on January, 20X1.
(b) Prepare the journal entry that Dorchester would record on each interest date.
(c) Prepare the journal entry that Dorchester would record at maturity of the bonds.
Problem 2
Evaluate the following features or comments and decide if the description would pertain to a capital lease or an operating lease.
Operating Lease Capital Lease
The lessee reports the leased asset on its balance sheet x
Payments are reported fully as rent expense x
Ownership of the property passes to the lessee by the end of the lease term x
The lease term is at least 75% of the remaining life of the property x
Interest expense is measured and reported by the lessee x
Depreciation of the leased asset is not reported by the lessee x
At the inception of the lease, the lessee records both an asset and liability x
The lessee reports a liability for the present value of all future payments anticipated under the lease agreement x
The lessor continues to report the tangible asset covered by the lease on its balance sheet x
Problem 3
Examine the following transactions and put the dollar amount in the correct box. Item four will have two boxes with amounts and it is possible that an item could have no entry required.
Item 1 Paid $2,500 for 20X7 insurance coverage on...