20A2 - Intermediate Accounting - Introduction

Mike Corporation issues 10,000 shares of $12 par value preferred stock for $15 cash per share. The journal entry to record the issuance is:

• Dr. Cash $150,000

  Cr. Preferred Stock $150,000

• Dr. Cash $150,000

  Cr. Common Stock $120,000

  Cr. Paid-in Capital in Excess of Par – Common Stock $30,000

• Dr. Cash $120,000

  Cr. Common Stock $120,000

• Dr. Cash $150,000

  Cr. Preferred Stock $120,000

  Cr. Paid-in Capital in Excess of Par – Preferred Stock $30,000

On July 1, 2017, Rio Corporation acquires 2,000 shares (10% ownership) of Beal Corporation common stock. Sanchez pays $40 per share. The entry for the purchase is:

• Dr. Cash $80,000

  Cr. Stock Investments $80,000

• Dr. Stock Investment $80,000

  Cr. Cash $80,000

• Dr. Stock Investment $8,000

  Cr. Cash $8,000

• Dr. Cash $8,000

  Cr. Stock Investment $8,000

1. On January 1, 2017, Candle, Inc. sells $100,000, five-year, 10% bonds for $98,000 (98% of face value). Interest is payable annually January 1. The entry to record the issuance is:

• Dr. Cash $98.000

  Dr. Discount on Bonds Payable $2,000

  Cr. Bonds Payable $100,000

• Dr. Cash $98,000

  Cr. Bonds Payable $98,000

• Dr. Cash $100,000

  Cr. Bonds Payable $100,000

• Dr. Cash $100.000

  Cr. Bonds Payable $98,000

  Cr. Premium on Bonds Payable $2,000

A company that acquires less than 20% ownership interest in another company should account for the stock investment in that company using the ...... method.

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the ......... to the cash basis.