ACC 545 Week 3: Jamona Corporation
Ada M. Tickle
Week 3 ACC/545
Jamona Corporation
Scenario 1
Journal Entries
Dates Accounts Debit Credit
1 Jan 2006 Available for sale securities 322,744.44 Cash 322,744.44
31 Dec 2006 Cash 36,000 Available for sale securities 3,725.56 Interest Revenue ($3222.744.44 X .10) 32,274.44 31 Dec 2006 Securities Fair Value Adjustment (available for sale) 1,481.12 Unrealized Holding Gain or Loss Equity (320,500.00 – 319,018.88) 1,481.12
31 Dec 2007 Unrealized Holding Gain or Loss- Equity 7,401.89 Securities Fair Value Adjustment (Available for Sale) 7,401.89
Note Disclosures Unrealized Amortized Holding Gain
Cost Fair Value (loss)
Available for sale bonds $314,920.77 $309,000.00 `$(5,920.77)
Previous securities fair value adjustment Debit 1,481.12
Securities fair value adjustment Credit $(7,401.89)
Scenario 2
Jamona Corporation
Computations of Inventory for Product
BAP Under FIFO Inventory Method
Dates Units Unit Cost Total Cost
March 26,2007 600 $12.00 $7,200
February 16, 2007 800 11.00 8,800
January 25, 2007
Portion 200 10.00 2,000
March 31, 2007
Inventory 1,600 $18,000
Scenario 3
Journal Entries
Accounts Debit Credit
Land 350,000
Building 1,050,000
Machinery and Equipment 700,000
Common Stock (12,500 X $100) 1,250,000
Paid in Capital in Excess of Par
($2,100,000 - $1,250,000 850,000
The cost of the property, plant and equipment is $2,100,000
($12,500 X $168).
This cost is allocated based on appraisal values commutated below:
Land $400,000 X $2,100,000 = $350,000 $2,400,000
Building $1,200,000 X $2,100,000 = $1,050,000 $2,400,000
Machinery & Equipment $800,000 X $2,100,000 = $700,000 $2,400,000
Journal Entries
Accounts Debit Credit
Buildings (105,000 + 161,000) 266,000
Machinery and Equipment 135,000
Land Improvements 122,000
Land 18,000 Cash 541,000
Journal Entries
Accounts Debit Credit
Machinery and Equipment 265,300 Cash
(10,500+254,800 which is 98% of 260,000) 265,300
Scenario 4
This is a capital lease to Jamona Corporation since the lease term 5 years is greater than 75% of the economic life 6 years of the leased asset. The lease term is 83 1/3% (5/6) of the assets economic life.
Computation of present value of minimum lease payments:
8,668 X 4.16986 = $36,144
The present value of an annuity due of 1 of 5 periods at 10%
Journal Entries
Leased Machine Under Capital
Dates Accounts Debit Credit
1 Jan 2007 Leases 36,144 Lease Liability 36,144 Lease Liability 8,668 Cash 8,668
31 Dec 2007 Depreciation Expense 7,229 Accumulated Depreciation Capital Leases (36,144 / 5 = 7,229) 7,229
31 Dec 2007 Interest Expense 2,748 Interest Payable
(36,144 – 8,668) X 0.10 = 2,748 2,748
1 Jan 2008 Lease Liability 5,920 Interest Payable 2,748 Cash 8,668
Week 3 ACC/545
Jamona Corporation
Scenario 1
Journal Entries
Dates Accounts Debit Credit
1 Jan 2006 Available for sale securities 322,744.44 Cash 322,744.44
31 Dec 2006 Cash 36,000 Available for sale securities 3,725.56 Interest Revenue ($3222.744.44 X .10) 32,274.44 31 Dec 2006 Securities Fair Value Adjustment (available for sale) 1,481.12 Unrealized Holding Gain or Loss Equity (320,500.00 – 319,018.88) 1,481.12
31 Dec 2007 Unrealized Holding Gain or Loss- Equity 7,401.89 Securities Fair Value Adjustment (Available for Sale) 7,401.89
Note Disclosures Unrealized Amortized Holding Gain
Cost Fair Value (loss)
Available for sale bonds $314,920.77 $309,000.00 `$(5,920.77)
Previous securities fair value adjustment Debit 1,481.12
Securities fair value adjustment Credit $(7,401.89)
Scenario 2
Jamona Corporation
Computations of Inventory for Product
BAP Under FIFO Inventory Method
Dates Units Unit Cost Total Cost
March 26,2007 600 $12.00 $7,200
February 16, 2007 800 11.00 8,800
January 25, 2007
Portion 200 10.00 2,000
March 31, 2007
Inventory 1,600 $18,000
Scenario 3
Journal Entries
Accounts Debit Credit
Land 350,000
Building 1,050,000
Machinery and Equipment 700,000
Common Stock (12,500 X $100) 1,250,000
Paid in Capital in Excess of Par
($2,100,000 - $1,250,000 850,000
The cost of the property, plant and equipment is $2,100,000
($12,500 X $168).
This cost is allocated based on appraisal values commutated below:
Land $400,000 X $2,100,000 = $350,000 $2,400,000
Building $1,200,000 X $2,100,000 = $1,050,000 $2,400,000
Machinery & Equipment $800,000 X $2,100,000 = $700,000 $2,400,000
Journal Entries
Accounts Debit Credit
Buildings (105,000 + 161,000) 266,000
Machinery and Equipment 135,000
Land Improvements 122,000
Land 18,000 Cash 541,000
Journal Entries
Accounts Debit Credit
Machinery and Equipment 265,300 Cash
(10,500+254,800 which is 98% of 260,000) 265,300
Scenario 4
This is a capital lease to Jamona Corporation since the lease term 5 years is greater than 75% of the economic life 6 years of the leased asset. The lease term is 83 1/3% (5/6) of the assets economic life.
Computation of present value of minimum lease payments:
8,668 X 4.16986 = $36,144
The present value of an annuity due of 1 of 5 periods at 10%
Journal Entries
Leased Machine Under Capital
Dates Accounts Debit Credit
1 Jan 2007 Leases 36,144 Lease Liability 36,144 Lease Liability 8,668 Cash 8,668
31 Dec 2007 Depreciation Expense 7,229 Accumulated Depreciation Capital Leases (36,144 / 5 = 7,229) 7,229
31 Dec 2007 Interest Expense 2,748 Interest Payable
(36,144 – 8,668) X 0.10 = 2,748 2,748
1 Jan 2008 Lease Liability 5,920 Interest Payable 2,748 Cash 8,668