# On January 1, 2017, Garzon purchased 6% bonds issued by PBS Utilities at a cost of \$40,000, which is their par value. The bonds pay interest semiannually on July 1 and January 1. For 2017, prepare entries to record Garzon's July 1 receipt of interest and its December 31 year-end interest accrual. (Do not round your intermediate calculations.)

July 1st: Debit Cash=\$1,200 Credit Interest Received=\$1,200

December 31st: Debit Interest Receivable=\$1,200, Credit Interest Earned= \$1,200

Explanation:

July 1st Receipt of Interest

Step 1: Calculate Interest Receivable for the entire Year

=(\$40,000×6%)= 40,000×0.06= \$2,400

=\$2,400

Step 2:Calculate Interest Receivable for the first 6 months (Semi-annual Payment)

January 1st to July 1st is 6 Months, we therefore divide the annual interest receivable into 2

\$2,400÷2=\$1,200

Step 3: Entries for the July 1 Receipt of Interest

Debit Cash = \$1,200

Step 4: Calculate the Interest Accrual for the Decembe 31st

Between July 1st and December 31st is equally 6 months, therefore, the remaining \$1,200 is for the second half of the year.

Step 5: Entries for December 31st Interest Accrual

Debit Interest Receivable = \$1,200

Credit Interest Earned= \$1,200

## Related Questions

The owner of an Italian restaurant has just been notified by her landlord that the monthly lease on the building in which the restaurant operates will increase by 20% at the beginning of the year. Her current prices are competitive with nearby restaurants of similar quality. However, she is now considering raising her prices by 20 percent to offset the increase in her monthly rent. Would you recommend that she raise prices?

No

Explanation:

In a competitive market, price should be a function of variable/marginal costs not fixed costs.

With this in mind, are accountants ethically obligated to report financial information accurately? Does reporting using the generally accepted accounting principles imply accuracy? What are some potential consequences for an external analyst if a company provides inaccurate or misleading financial statements?

1. Accountants are ethically obligated to report financial information accurately

2. Reporting using the generally accepted accounting principles underscore on accuracy

3. Loss of confidence, lack of trust on the accounting team, a huge strain on their professional judgement and ethics.

Explanation:

1. Financial information in itself possesses some vital characteristics. One of these is the accuracy of the financial information. As the handler of financial activities, accountants are therefore saddled and ethically obligated to present and prepare their information accurately. This is so as to reflect the true picture of the going in the organization.

2. Reporting using GAAP - Generally Accepted Accounting Principles, seeks to converge the presentation of financial reports and statements on the basis of accuracy. Thus, reliability and relevance are ultimately the foremost objectives of these principles. I therefore have no doubt its usage conveys accuracy of reports.

3. Loss of confidence - financial reports through which the external analyst worked upon are often prepared by the internal staffs. The implication of a wrong and misleading reports from the company is an erosion of confidence on the credibility, reliability and competence of company's preparers of reports.

Lack of trust - The point above ultimately impacts on the level of trust placed on the accuracy, reliability and relevance of financial reports.

Professional Judgement and Ethics - The conducts of the company in presenting a wrong report throws the analyst into an ethnical dilemma, and a huge professional strain. This is not in line with best practices.

One year ago, you purchased 200 shares of Southern Foods common stock for \$7900. Today, you sold your shares for \$35.40 a share. During this past year, the stock paid \$1.25 in dividends per share. What is your percent return on this investment

Return on investment = -0.07215 or -7.215%

Explanation:

The rate of return or percent return on the investment can be calculated by deducting the initial cost of the investment from the current value of the investment and dividing it by the initial cost.

The return provided by the investment can be calculated by adding the returns provided in form of dividend and capital gains both. Thus, the return can be calculated as follows,

Total dividend = 1.25 * 200 = \$250

Total selling value = 35.4 * 200 = \$7080

Total value = 250 + 7080 = \$7330

Return on investment = (7330 - 7900) / 7900  =  -0.07215 or -7.215%

Javonte Co. set standards of 2 hours of direct labor per unit of product and \$15.80 per hour for the labor rate. During October, the company uses 12,100 hours of direct labor at a \$193,600 total cost to produce 6,400 units of product. In November, the company uses 16,100 hours of direct labor at a \$258,405 total cost to produce 6,800 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable. (2) Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?

October

direct labor rate variance =\$2,420 unfavorable

direct labor efficiency variance  =\$11,060 favorable

direct labor cost variance  = \$ 8,640 favorable

Investigate : direct labor efficiency variance

November

direct labor rate variance = \$4,025 unfavorable

direct labor efficiency variance =\$ 39,500 favorable

direct labor cost variance  = \$35,475 favorable

Investigate : direct labor efficiency variance

Explanation:

October

direct labor rate variance = (Aq × Ap) -  (Aq × Sp)

= (12,100×\$16) - (12,100×\$15.80)

=\$2,420 unfavorable

direct labor efficiency variance = (Aq × Sp) - (Sq × Sp)

=(12,100 × \$15.80) - (6,400×2 ×\$15.80)

=\$11,060 favorable

direct labor cost variance = direct labor rate variance + direct labor efficiency variance

= \$2,420 (A) + \$11,060 (F)

= \$ 8,640 favorable

November

direct labor rate variance = (Aq × Ap) -  (Aq × Sp)

= (16,100×\$16.05) - (16,100×\$15.80)

= \$4,025 unfavorable

direct labor efficiency variance = (Aq × Sp) - (Sq × Sp)

=(16,100 × \$15.80) - (6,800×2 ×\$15.80)

=\$ 39,500 favorable

direct labor cost variance = direct labor rate variance + direct labor efficiency variance

= \$4,025 (A) + \$ 39,500 (F)

= \$35,475 favorable

The 2017 balance sheet of Staples, Inc. shows total assets of \$8,271 million, operating assets of \$6,566 million, operating liabilities of \$3,527 million, and shareholders’ equity of \$3,688 million. Staples' 2017 net operating assets are: Select one: A. \$11,798 million
B. \$ 6,566 million
C. \$ 4,744 million
D. \$ 3,039 million
E. None of the above

D. \$ 3,039 million

Explanation:

Net Operating Assets = Operating Assets - Operating Liabilities

Net Operating Assets = \$6,566 million - 3,527 million

Net Operating Assets = \$3,039 million

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of \$244,200 and 9,200 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to \$245,000 and actual direct labor-hours were 6,100. The overhead for the year was: (Round your intermediate calculations to 2 decimal places.)

The overhead for the year will be \$245,000

Applied overheads in the year are \$161,894 and Underapplied overheads are \$83,106 total charged to cost of goods sold will be \$245,000

Explanation:

Predetermined overhead rate = 244,200 / 9,200

Predetermined overhead rate = 26.54 per labor hour

Overhead for the year = Predetermined overhead rate X Actual Direct Labor hours

Overhead for the year = 26.54 x 6100

Overhead for the year = 161,894.00

Underapplied overheads = 245,000 - 161,894 = 83,106.00

The overhead for the year is \$162,317.

### Explanation:

To calculate the overhead for the year, we need to use the predetermined overhead rate based on direct labor-hours. The predetermined overhead rate is calculated by dividing the total estimated overhead by the estimated direct labor-hours. In this case, the predetermined overhead rate is \$244,200 / 9,200 labor-hours, which is \$26.57 per labor-hour.

To find the overhead for the year, we multiply the actual direct labor-hours by the predetermined overhead rate. In this case, the actual direct labor-hours are 6,100. So the overhead for the year is 6,100 labor-hours * \$26.57 per labor-hour, which equals \$162,317.