BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 1 of 11

Name: _Kenisha Manicksingh _________ Student #_300306794

BuAD 121
Financial Accounting I

Chapters 13, 14, 15

Quiz Assignment

Instructions:

1. Complete the quiz by Friday, April 3rd by 11:59 p.m

 Submit to the Moodle dropbox in the ‘Quiz Assignment’ folder. The
submission file format can be Word, PDF, Excel of JPEG images – whatever
works best for you.

2. After the deadline, open the quiz assignment solution posted to Moodle (in ‘Quiz
Assignments’ folder).

3. Self-assess your work and make any necessary corrections using a different colour
pen or pencil. Be sure to clearly show both your original work and the corrections
made.

4. Complete the ‘Student Commentary’ form on the last page, which summarizes how
you performed on the quiz assignment.

5. Submit the corrected quiz, including the ‘Student Commentary’ form, byTuesday,
April 7th by 11:59 p.m

6. To receive full credit for this assignment, the ‘Student Commentary’ form must be
completed.
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 2 of 11

Question 1 (15 marks)

On Jan. 1, 2020, Olson Industries issued $460,000 (par value) of its 5-year, 7% bonds. Interest is
paid semi-annually on June 30th and December 31st. At the time of issue, the market rate for
bonds of similar risk and type was 8%.

REQUIRED:
A. [4 marks] Give the journal entry to record the issue of these bonds on January 1, 2020.

Date Account and Explanation Debit Credit

Jan. 1, 2020 Cash $441,345
Bonds Payable $441,345

B. [6 marks] Record the journal entries on June 30th and December 31st, 2020.

Date Account and Explanation Debit Credit

June 30, 2020 Interest Expense $17,654
Cash $16,100
Bonds Payable $1,554

Dec. 31, 2020 Interest Expense $17,716

Interest Payable $16,100
Bonds Payable $1,616
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 3 of 11

Question 1 (continued)

C. [2 marks] On Jan. 1, 2020, Olson Industries issued $460,000 (par value) of its 5-year, 7%
bonds. Interest is paid semi-annually on June 30th and December 31st.

Determine the issue price of the bond if the market rate of interest was 6%?

Issue price $___479,619______________

D. [3 marks] Complete the amortization schedule below for the first three years of the bond
issued in part C. above.

Date Interest Interest Premium / Bond Amortized

Payment Expense Discount Cost
Amortization
Jan 1, 2020 $479,619
June 30, 2020 $16,100 $14,389 $1,711 $477,908
Dec 31, 2020 $16,100 $14,337 $1,763 $476,145
June 30, 2021 $16,100 $14,284 $1,816 $474,330
Dec 31, 2021 $16,100 $14,230 $1,870 $472,460
June 30, 2022 $16,100 $14,174 $1,926 $470,533
Dec 31, 2022 $16,100 $14,116 $1,984 $468,549
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 4 of 11

Question 2 (8 marks)

Cheers Corporation reported the following information related to the year ended July 31, 2021:

Accumulated other comprehensive income, August 1, 2020 $ 67,000

Cash dividends on preferred shares 23,000
Common shares, unlimited number authorized; 10,000 issued 1,000,000
Contributed surplus resulting from prior years' repurchase of common
15,000
shares
Profit for the year 434,000
Gain on fair value adjustments on equity investments (net of income
7,800
taxes)
Comprehensive income 441,800
Preferred shares; $ 4 cumulative; 1,000,000 authorized, 4,000 issued 480,000
Retained earnings, August 1, 2020 753,250
Stock dividends on common shares 100,000

Instructions

A. [3 marks] Prepare Cheer’s statement of comprehensive income for the year ended July 31,
2021.

CHEERS CORPORATION
Statement of Comprehensive Income
Year Ended July 31, 2021
$ $
Profit 434,000
Other Comprehensive Income:
Gain on fair value adjustments on equity investments 7,800
(net of income taxes)
Comprehensive Income: 441,800
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 5 of 11

Question 2(continued)

B. [5 marks] Prepare Cheer’s statement of changes in shareholders’ equity for the year ended
July 31, 2021.

CHEERS CORPORATION
Statement of Changes in Shareholders’ Equity
Year Ended July 31, 2021

Contributed
surplus, Accumulated
reacquisition other
Preferred Common of common Retained comprehensive
shares shares shares earnings income Total
Balance, August
$480,000 1,000,000 15,000 753,250 67,000 2,315,250
1, 2020
Stock Dividends
on common - - - (100,000) - (100,000)
Shares
Cash Dividends
on preferred - - - (23,000) - (23,000)
Shares

Balance, July 31,

480,000 1,000,000 15,000 630,250 67,000 2,192,250
2020
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 6 of 11

Question 3 (8 marks)

Star Industries Inc. had 8,000 $2 cumulative preferred shares outstanding since January 1, 2018
and no dividends had been declared on those shares since that date. The following share
transactions occurred during 2020:

Feb. 1 Issued 3,000 common shares for cash at $24 per share.

June 25 Issued 2,400 common shares in exchange for some used equipment from EdCo
Inc. The fair value of the equipment on June 25 was $60,000.

Dec. 31 Declared a total cash dividend of $80,000.

REQUIRED:
Journalize the above transactions. For the December 31 transaction, use two separate dividend
payable accounts: one to Preferred and one to Common.

Date Account and Explanation Debit Credit

$ $
Feb. 1, 2020 Cash 72,000
Common Shares 72,000

June 25, 2020 Equipment 60,000

Common Shares 60,000

Dec. 31, 2020 Cash Dividends (Preferred) 48,000

Cash Dividends (Common) 32,000
Dividends Payable 80,000
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 7 of 11

Question 4 (8 marks)

On March 2, 2020, Nova Inc. had 20,000 common shares outstanding with a book value of
$680,000. On March 3, the company purchased and cancelled 2,000 of its own common shares
for $32 per share. Then, on Dec. 5, it purchased and cancelled 5,000 more of its shares at $37 per
share

REQUIRED:
Give the journal entries on March 3 and Dec. 5 to record the share purchases.

Date Account and Explanation Debit Credit

$ $
Mar. 3, Common Shares (2,000 x 34) 68,000
2020
Contributed Surplus – Reacquisition of 4,000
common shares (2,000 x 2)
Cash (2,000 x 32) 64,000

Dec. 5, Common Shares (5,000 x 34) 170,000

2020
Contributed Surplus – Reacquisition of 4,000
common shares
Retained Earnings ($15,000 - $4,000) 11,000
Cash 185,000
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 8 of 11

Question 5 (6 marks)

DCF Corporation’s 2020 net income was $60,000 and it declared and paid $5,000 in dividends
on its non-cumulative preferred shares for the year. It had 15,000 common shares outstanding on
Jan. 1, 2020. The following share transactions occurred during 2020:

 March 1, repurchased and cancelled 3,000 common shares.

 July 1, issued 2,000 more preferred shares
 August 1, issued 2,000 more common shares
 October 1, issued 4,000 more common shares.

REQUIRED:
Compute the earnings per share (EPS) for 2020.

Date # of Shares Year Weighted Average

Jan-Feb 15000 2/12 2500

Mar-june 12000 4/12 4000

Aug-sept 14000 2/12 2333

Oct-dec 18000 3/12 4500

Weighted average common share – 13,333

Earnings per share – Profit preferred dividends

 BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 9 of 11

Question 6 (8 marks)

Moncton Ltd’s equity section on the April 1, 2020 balance sheet showed the following
information:

Common shares (150,000 issued and outstanding) 1,102,500

Retained earnings 633,000
Total Shareholder’s Equity 1,735,500

On April 1, Moncton declares a 10% share dividend for all shareholders of record as of April 10th
to be distributed on April 30th. The market value of the shares was $25 on April 1, $27 on April
10th and $23 on April 30th.

REQUIRED:
A. [5 marks] Give the required journal entries on April 1, April 10 and April 30 to record
the above activity. Record dividends directly to Retained Earnings.
B. [3 marks] Show the equity section of Moncton’s balance sheet as of April 30th assuming
no other activity.

Date Account and Explanation Debit Credit

April 1 Share Dividends- common 375,000
Dividends payable 375,000

April 10 No entry
No entry

April 30 Dividends Payable 375,000

Cash 375,000

B.Equity Section of Balance Sheet:

BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 10 of 11

Question 7 (8 marks)

Lomas Inc. wishes to purchase and retire a bond with a face value of $500,000. At the time of
the purchase, the amortized cost of the bond was $495,500. Record the entries to purchase and
retire the bond with the following three purchase amounts:

a) $495,500
b) $497,500
c) $492,500

Date Account and Explanation Debit Credit

$ $
Bonds Payable 495,500
Cash 495,500

Bond Payable 495,500

Loss on Bond Redemption 2,000
Cash 497,500

Bonds Payable 495,500

Gain on Bond Redemption 3,000
Cash 492,500
BuAD 121 Chapters 13, 14, 15– Quiz Assignment Page 11 of 11

Name____________________________________________________

Student # _________________________________

Provide a brief commentary on how you performed on this quiz assignments. What did you do
well and what specific areas did you need to make corrections? Identify any specific topics you
need to review in more detail prior to the final exam.

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