THE UNIVERSITY OF TEXAS RIO GRANDE VALLEY

ACCT 335O INTERNATIONAL ACCOUNTING FALL 2016

Assignment
Student Name: Sandra Rodriguez Name: Chapter 10 HW Assignment
Date/Time of Due
Submission: 11/29/2016 18:43:20 a11/p11 Due: November 14th @ 11:58 p.m.
Date/Time:
Week 10 SUBMIT: Answer following questions in space below. Upon completion, email your answers to
Assignment instructor at robert.gomez@utrgv.edu

Chapter 10 homework assignment (Answer all questions in the space provided below.)

QUESTION #1
Instructions:
(a) Journalize the January transactions.

(b) Journalize the adjusting entry at January 31 for interest on outstanding notes payable to DeKalb Bank.

(c) Prepare the current liabilities section of the statement of financial position at January 31, 2017. Assume
no change in accounts payable.
COMPANY INFO:
On January 1, 2017, the ledger of Shumway Ltd. contains the following liability accounts

Accounts Payable ………………………. £52,000

Sales Tax Payable ………………………. 5,800
Unearned Service Revenue ……….. 13,000

During January, the following selected transactions occurred.

Jan. 1 Borrowed £14,000 from DeKalb Bank on a 3-month, 6%, 14.000 note.

6 Sold merchandise for cash totaling £22,470 which includes selling price plus 7% sales tax.

8 Received £10,000 in advance payment for services to be delivered on January 30, 2017.

14 Paid tax authorities for sales taxes collected in December 2016 (£5,800).

20 Sold 700 units of a new product on credit at £52 per unit, plus 7% sales tax.

25 Sold merchandise for cash totaling £12,947, which includes 7% sales taxes.

30 Delivered services for customers who had made advance payment of £10,000 on January 8,
2017.

GENERAL JOURNAL
(a)
Jan Account Title Debit Credit
1 Cash 14,000
Notes Payable 14,000
Account Title Debit Credit
6 Cash 24,042.9
Sales Revenue 22,470
Sales Tax Payable 1,572.9

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 Account Title Debit Credit
8 Cash 10,000
Unearned Service Revenue 10,000
Account Title Debit Credit
14 Sales Tax Payable 5,800
Cash 5,800
Account Title Debit Credit
20 Accounts Receivable 38,948
Sales Revenue 36,400
Sales Tax Payable 2,548
Account Title Debit Credit
25 Cash 13,853.29
Sales Revenue 12,947
Sales Tax Payable 96.29
Account Title Debit Credit
30 Unearned Service Revenue 10,000
Service Revenue 10,000
(b)
Jan Account Title Debit Credit
31 Interest Expense 70
Interest Payable 70

(c)
Instructions: Post above journal entries to the following T-accounts:
select T-Accounts

ACCOUNTS
SALES TAX
CASH PAYABLE PAYABLE SALES REVENUE
14000 5800 Bal. 52,000 5800 Bal. 5,800 22470
24042.9 52000 1572.9 36400
10000 2548 12947
13853.29 906.29 71817
5027.19
56096.19

ACCOUNTS NOTES
RECEIVABLE PAYABLE INTEREST PAYABLE SERVICE REVENUE
38948 14000 70 10000
38948 14000 70 10000

UNEARNED SERVICE
REVENUE INTEREST EXPENSE
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 10000 Bal. 13,000 70
10000 70
13000

(c)
Instructions: Prepare CURRENT LIABILITIES section of Shumway’s statement of financial position at January 31, 2017.
Your response:
SHUMWAY LTD.
Partial Statement of Financial Position
January 31, 2017
Current Liabilities
Accounts Payable …………………………………………………………… € 52,000
Notes Payables ………………………………………………………………. 14,000
Unearned Service Revenue …………………………………………….. 13,000
Sales Tax Payable …………………………………………………………… 5,027.19
Interest Payable …………………………………………………………….. 70
Total current liabilities ………………………………………….. € 84,097.19

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________________________________________________

QUESTION #2
Instructions:
(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2017.

(b) At December 31, 2017, the amount of amortized bond discount is £8,000. Show the statement of financial
position presentation of the bond liability at December 31, 2017.

(c) On January 1, 2019, when the carrying value of the bonds was £5,896,000, the company redeemed the
bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been
paid.

COMPANY INFO: Kershaw Electric Ltd. sold £6,000,000, 10%, 15-year bonds on January 1, 2017. The bonds
were dated January 1, 2017, and paid interest on January 1. The bonds were sold at 98.
GENERAL JOURNAL
(a) 2017
Jan. Account Title Debit Credit
1 Cash 5,880,000
Bonds Payable 5,880,000
(b)
Show your computations: KERSHAW ELECTRIC LTD.
Partial Statement of Financial Position
December 31, 2017
Non-current Liabilities
Bonds payable, due 2027 ……………………………………………….. € 5,888,000

(c) 2019
Jan. Account Title Debit Credit
1 Bonds Payable 5,896,000
Loss on Bond Redemption 224,000
Cash 6,120,000

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________________________________________________

QUESTION #3
Instructions:
a) Prepare the journal entries to record the following transactions.

1) The issuance of the bonds on January 1, 2017.

2) Accrual of interest and amortization of the premium on December 31, 2017.
3) The payment of interest on January 1, 2018.
4) Accrual of interest and amortization of the premium on December 31, 2018.

b) Show the proper non-current liabilities statement of financial position presentation for the bond liability at
December 31, 2018.
c) Provide the answers to the following questions in short answer form.
1) What amount of interest expense is reported for 2018?

2) Would the bond interest expense reported in 2018 be the same as, greater than, or less than the
amount that would be reported if the straight-line method of amortization were used?

COMPANY INFO: On January 1, 2017, Jade SA issued €2,000,000 face value, 7%, 10-year bonds at €2,147,202.
This price resulted in a 6% effective-interest rate on the bonds. Jade uses the effective-interest method to
amortize bond premium or discount. The bonds pay annual interest on each January 1.
GENERAL JOURNAL
(a)(1) 2017
Jan Account Title Debit Credit
1 Cash 2,147,202
Bonds Payable 2,147,202
(a)(2) 2017
Dec Account Title Debit Credit
31 Interest Expense 128,832
Bonds Payable 11,168
Interest Payable 140,000
(a)(3) 2018
Jan Account Title Debit Credit
1 Interest Payable 140,000
Cash 140,000
(a)(4) 2018
Dec Account Title Debit Credit
31 Interest Expense 128,162
Bonds Payable 11,838
Interest Payable 140,000
(b)
Show your computations: JADE SA
Partial Statement of Financial Position
December 31, 2018
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 Non-current Liabilities
Bonds payable ………………………………………………………... € 23,006 (Computations below)
11168+11828=23006
(c)(1)
Show your computations:

Total bond interest expense for 2018 = (128832+128162)

256,994 (Computation below)

(c)(2)
Show your computations:

Interest expense under the straight line method would be less for 2018. $250,560
(Computation Below)

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QUESTION #4
Instructions:
a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for
2017, assuming that the bonds sold at 104.

b) Prepare journal entries as in part (a) assuming that the bonds sold at 98.

c) Show the statement of financial position presentation for the bonds at December 31, 2017, for both the
requirements in (a) and (b).

COMPANY INFO: Saberhagen Ltd. sold ¥3,500,000, 8%, 10-year bonds on January 1, 2017. The bonds were
dated January 1, 2017, and pay interest annually on January 1. Saberhagen Company uses the straight-line
method to amortize bond premium or discount.
GENERAL JOURNAL
(a) 2017
Jan Account Title Debit Credit
1 Cash 3,640,000
Bonds Payable 3,640,000
(a) 2017
Dec Account Title Debit Credit
31 Interest Expense 266,000
Bonds Payable 14,000
Interest Payable 280,000
(b) 2017
Jan Account Title Debit Credit
1 Cash 3,430,000
Bonds Payable 3,430,000
(b) 2017
Dec Account Title Debit Credit
31 Interest Expense 287,000
Bonds Payable 7,000
Interest Payable 280,000
(c) PREMIUM

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Show your computations: SABERHAGEN LTD
Partial Statement of Financial Position
December 31, 2017
Non-current Liabilities
Bonds payable, due 2027 ……………………………………….. ¥ 14,000
Current Liabilities
Interest Payable ………………………………………………………... 280,000

2017
2018
2019
2020
2021
2022
2023
2024
2025
2026

(c) DISCOUNT
Show your computations: SABERHAGEN LTD
Partial Statement of Financial Position
December 31, 2017
Non-current Liabilities
Bonds payable, due 2027 ……………………………………….. ¥ 7,000
Current Liabilities
Interest Payable ………………………………………………………... 280,000

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 2017
2018
2019
2020
2021
2022
2023
2024
2025
2026

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QUESTION #5 Instructions:
(a) Journalize the payment of bond interest on January 1, 2018.

(b) Prepare the entry to amortize bond premium and to accrue the interest due on December 31, 2018.

(c) Assume that on January 1, 2019, after paying interest, Colaw calls bonds having a face value of €1,200,000.
The call price is 101. Record the redemption of the bonds.

(d) Prepare the adjusting entry at December 31, 2019, to amortize bond premium and to accrue interest on
the remaining bonds.

COMPANY INFO: The following is taken from the Colaw SA statement of financial position.

COLAW
Partial Statement of Financial Position
December 31, 2017
Non-current Liabilities
Bonds payable (face value €3,000,000, 7% due January 1, 2018) ……………. € 3,200,000
Current Liabilities
Interest payable (for 12 months from January 1 – December 31) ………….. 210,000

Interest is payable annually on January 1. The bonds are callable on any annual interest date. Colaw uses
straight-line amortization for any bond premium or discount. From December 31, 2017, the bonds will be
outstanding for an additional 10 years (120 months).

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 GENERAL JOURNAL
(a) 2017
Jan Account Title Debit Credit
1 Interest Payable 210,000
Cash 210,000

(b) 2017
Dec Account Title Debit Credit
31 Interest Expense 190,000
Premium on Bonds Payable 20,000
Cash 210,000

(c) 2019
Jan Account Title Debit Credit
1 Bonds Payable 1,200,000
Premium on Bonds Payable 72,000
Gain on Bond Redemption 60,000
Cash 1,212,000

(d) 2019
Dec Account Title Debit Credit
31 Interest Expense 198,000
Premium on Bonds Payable 12,000
Interest Payable 210,000

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