Question 1. Kramer Corporation had the following long-term investment transactions.
Jan 2 Purchased 5,000 shares of Optic, Inc. for $42 per share plus $7,000 in fees and commission. These shares represent a 35% ownership of Optic.
Oct 15 Received Optic, Inc. cash dividend of $2 per share.
Dec 31 Optic reported a net loss of $66,000 for the year.
Prepare the journal entries Kramer Corporation should record for these these transactions and events.
Question 2. Walker Corporation issued 14%, 5year bonds with a pay value of $5,000,000 on January 1, 2009. Internet is to be paid semiannually on each June 30 and December 31. The bonds are issued at $5,368,035 cash when the market rate for this bond is 12%.
(a) Prepare the general entry to record the issuance of the bonds on January 1, 2009.
(b) Show how the bonds would be reported on Walker's balance sheet at January 1, 2009.
(c) Assume that Walker uses the effective interest method of amortization of any discount of premium on bonds. Prepare the general entry to record the first semiannual interest payment on June 30, 1009.