Question 1:

Conwy company invested $6,808,000 to purchase $7,000,000, 10%, 8-year bonds issued by
Bangor company on October 1, 2020. The bonds were dated October 1, 2018 and pay interest
semi-annually on October 1 and April 1. Conwy and Bangor use straight-line amortization for
bond premium or discount. Financial statements of both companies are prepared annually on
December 31.

Instructions
Prepare the journal entries for both companies on the following dates:
(a) 1st October 2020.
(b) 31st December 2020.
(c) 1st April 2021.
Bangor
a. Cash 6,808,000
Discount on bp 192,000
Bond payable 7,000,000

b. Interest exp (3 months) 181,000

Discount on bp (192,000/12x8)x3 6,000
Interest payable (7,000,000/12)x10% x3) 175,000

c. Interest payable 175,000

Interest exp 181,000
Discount on bp 6,000
Cash (7,000,000/2)x10% 350,000
Conwy
a. Debt investment 6,808,000
Cash 6,808,000

b. Interest receivable 175,000

Debt investment 6,000
Interest revenue 181,000
 c. cash 350,000
debt investment 6,000
interest revenue 181,000
interest receivable 175,000
Question 2:

Belle Corp. used the following information in recording its bank reconciliation for the month
of August.
Balance per books August 31 $ 19,480
Balance per bank statement August 31 $ 22,350
_________________________________________________________________________________________________________________

(1) Checks written in August but still outstanding $5,200.

(2) Deposits of August 31 not yet recorded by bank $3,700.
(3) Check No. 805 for $260 was correctly issued and paid by bank but was recorded
as $620 in the cash payments journal.
(4) Bank commission charge for August was $75.
(5) The bank collected a note receivable for the company of $2,500 plus $75 interest
revenue.
(6) NSF check of customer returned by bank $490.
(7) Belle deposited $1,850 into the bank and properly recorded it in Cash at Bank
accounts but the bank credited this amount for only $850.
Instructions
1. Prepare a bank reconciliation at August 31.
2. Prepare adjusting entries as needed

Question 3:

The following information is available for Marcus Corporation for the year ended December
31, 2020:
Acquisition = purchase of long-term bonds issued by a partner company-ia 35,000
Proceeds from the sale of an equipment which has book value of $22,000 18,700
Acquisition of treasury stock for cash-fa 16,000
Depreciation expense=oa 9,800
Payment of cash dividends-fa 34,000
Net income 62,500
In addition, the following information is available from the comparative balance sheet for
Marcus at the end of 2020 and 2019:
. 2020 2019
Cash $28,500 $7,900
Accounts receivable (net) 7,800 11,200
Prepaid Rent 5,500 4,200
Accounts payable 10,200 14,300
Unearned sales revenue 38,400 25,100

Instructions
Prepare Marcus' statement of cash flows for the year ended December 31, 2020, using
the indirect method.