Advanced Financial Accounting - II - Preston University

v. The 1,000,000, shares of common stock were outstanding for the entire 2008 fiscal year.vi. Net income for fiscal year 2008 was $1,500,000, and the average income tax rate is 40%.ISNTRUCTIONS: .For the fiscal year ended June 30, 2008, calculate the following for Dewey Yaeger Pharmaceutical Industries:i. Basic earnings per share.ii. Diluted earnings per share.Octavio Paz Corp. Carries an account in its general ledger called investments, which contained debits forinvestment purchases, and no credits.Feb. 1,2008 Chiang Kai-Shek Company common stock, $100 par, 200 sh'ares $ 37,400April 1, U.S. government bonds, 11%, due April 1,2016, Interest payableApril 1 and October 1, lOObonds of $1,000 par each. 100,000July 1 Claude Monet Company 12% bonds, par $50,000, dated March 1, 2006purchased at 104 plus accrued interest, interest payableINSTRUCTIONS:annually on March 1, due March 1,2026. 54,000(Round all computations to the nearest dollar)i. Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities areclassified as available-for-sale.ii. Prepare the entry to record the accrued interest and the amortization of premium on December 31,2006,using the straight-line method. • jiii. The fair values of the securities on December 31,2006, were;Chiang Kai-shek Company common stock $ 3j,800U.S. government bonds 124,700Claude Monet Company bonds . 58,600What entry or entries, if any, would you recommend be made?iv. The U.S. government bonds were sold on July 1, 2007, for $119,200 plus accrued interest. Give the proper,entry.Cascade Industries and Hardy Inc. enter into an agreement that requires Hardy Inc. to build three diesel-eleclricengines to Cascade's specifications. Upon completion of the engines, Cascade has agreed to lease them for aperiod of 10 years and to assume all casts and risks of ownership. The lease is noncancelable, becomes effectiveon January 1,2008, and requires annual rental payments of $620,956 each January 1, starting January 1,2008.Cascade's incremental borrowing rate is 10%. The implicit interest rate used by Hardy Inc. and known toCascade is 8%. The total cost of building the three engines is $3,900,000. The economic life of the engines isestimated to be 10 years, with residual value set at zero. Cascade depreciates similar equipment on a straight-linebasis. At the end of the lease, Cascade assumes title to the engines. Collectibility of the lease payments isreasonably certain; no uncertainties exist relative to unreimbursable lessor costs.INSTRUCTIONS:(Round all numbers to the nearest dollar.)i. Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor.ii. Prepare the journal entry or entries to record the transaction on January 1, 2008, on the books of CascadeIndustries.iii. Prepare the journal entry or entries to record the transaction on January; 1 2008, on the books of Hardy Inc.iv. Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2008.V. Prepare the journal entries for both the lessee and lessor to record interest expense (revenue) at December 31,2008. (Prepare a lease amortization schedule for 2 years),vi. Show the items and amounts that would be reported on the balance sheet (not notes) at December 31,2008,for both the lessee and the lessor.iPage 3 of