Examination card № 17

on the discipline “Financial Accounting II”

for the 3rd year students

What Is Significant Influence?
Listed below are several terms and phrases associated with current liabilities. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.

List A.

Face amount ×Interest rate ×Time.Informal agreement
Payable with current assets.
Short-term debt to be refinanced with common stock.
Present value of interest plus present value of principal.
Noninterest-bearing.
Noncommitted line of credit.
Pledged accounts receivable.
Reclassification of debt.
Purchased by other corporations.
Expenses not yet paid.
Liability until refunded.
Applied against purchase price.

List B.

Secured loan
Refinancing prior to the issuance of the financial statements
Accounts payable
Accrued liabilities
Commercial paper
Current liabilities
Long-term liability
Usual valuation of liabilities
Interest on debt
Customer advances
Customer deposits

FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T’s investment activities during the last two months of 2013. At November 1, FF&T held $48 million of 20-year, 10% bonds of Convenience, Inc., purchased May 1, 2013, at face value. Management has the positive intent and ability to hold the bonds until maturity. FF&T’s fiscal year ends on December 31.

Nov. 1 Received semiannual interest of $2.4 million from the Convenience, Inc., bonds.

Dec. 1 Purchased 12% bonds of Facsimile Enterprises at their $30 million face value, to be held until they mature in 2026. Semiannual interest is payable May 31 and November 30.

31 Purchased U.S. Treasury bills that mature in two months for $8.9 million.

31 Recorded any necessary adjusting entry(s) relating to the investments. The fair values of the investments at December 31 were: Convenience bonds $44.7 million Facsimile Enterprises bonds 30.9 million U.S. Treasury bills 8.9 million

Required:

Prepare the appropriate journal entry for each transaction or event.

Lecturer A. Kaldarova ______________________

Confirmed at the meeting of the department of "Socio-Economic Disciplines"

Minute №____ from ____ of 2015.

The dean of the faculty "International Educational Programs"

Ronald Voogdt _____________

^{name signature}

Examination card № 18

on the discipline “Financial Accounting II”

for the 3rd year students

Distinguish between basic and diluted EPS.
On January 1, 2013, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $300 million cash. At the date of acquisition of the stock, Lake’s net assets had a fair value of $900 million. Their book value was $800 million. The difference was attributable to the fair value of Lake’s buildings and its land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended December 31, 2013, was $150 million. During 2013, Lake declared and paid cash dividends of $30 million. The buildings have a remaining life of 10 years.

Required:

Prepare all appropriate journal entries related to the investment during 2013, assuming Cameron accounts for this investment by the equity method.

The Gorman Group issued $900,000 of 13% bonds on June 30, 2013, for $967,707. The bonds were dated on June 30 and mature on June 30, 2033 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually on December 31 and June 30.

Required:

Prepare the journal entry to record their issuance by The Gorman Group on June 30, 2013.
Prepare the journal entry to record interest on December 31, 2013 (at the effective rate).
Prepare the journal entry to record interest on June 30, 2014 (at the effective rate).