Assignment:
Jamona Corporation
On January 1, 2006, Jamona Corp. purchased 12% bonds, having a maturity value of $300,000, for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2006, and mature January 1, 2011, with interest receivable December 31 of each year. The company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale. The fair value of the bonds at December 31 of each year is as follows:
o 2006 – $320,500
o 2007 – $309,000
o 2008 – $308,000
o 2009 – $310,000
o 2010 – $300,000
The following information is available from Jamona’s inventory records:
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Units
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Unit Cost
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January 1, 2007 (beginning inventory)
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600
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$ 8.00
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Purchases:
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|
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January 5, 2007
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1,200
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9.00
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January 25, 2007
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1,300
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10.00
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February 16, 2007
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800
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11.00
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March 26, 2007
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600
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12.00
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A physical inventory on March 31, 2007, shows 1,600 units on hand. Select any one of the inventory methods (LIFO, FIFO, Average Cost, or others).
o On July 6, Jamona Corp. acquired the plant assets of Berry Company, which had discontinued operations. The appraised value of the property is:
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Land
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$ 400,000
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Building
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1,200,000
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Machinery and equipment
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800,000
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Total
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$2,400,000
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Jamona Corp. gave 12,500 shares of its $100 per value common stock in exchange. The stock had a market value of $168 per share on the date of the purchase of the property.
Jamona Corp. expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building.
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Repairs to building
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$105,000
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Construction of bases for machinery to be installed later
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135,000
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Driveways and parking lots
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122,000
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Remodeling of office space in building
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161,000
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Special assessment by city on land
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18,000
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On December 20, the company paid cash for machinery, $260,000, subject to a 2% cash discount, and freight on machinery of $10,500.
On January 1, 2007, Jamona Corp. signed a 5-year, noncancelable lease for a machine. The terms of the lease called for Jamona to make annual payments of $8,668 at the beginning of each year, starting January 1, 2007. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts to the lessor at the end of the lease term. Jamona uses the straight-line method of depreciation for all of its plant assets. Jamona’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.