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ACCTG 305 Chapter 5 Homework

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Accounting 305

Chapter 5, Homework


  1. Dylan Corp leases some unused warehouse space to Carter Corp for $5k/month, payable in advance.  On 8/01/2013 Dylan received $60k rent from Carter for the one year period 8/01/2013 – 7/31/2014.  Required: Determine how much of this $60k rent received by Dylan on 8/01/13 should recognize in its:

a)    income statement for the year ended 12/31/2013 as rent revenue, and 

b)    12/31/2013 balance sheet as unearned rent revenue?


  1. Clark Corp began operations on 1/01/14 and has a fiscal year end of 12/31.  Clark rebuilds transmissions and provides a 12 month warranty on all its work.  Clark estimates that warranty performance cost will be approximately 2% of revenue.  During 2015, Clark rebuilds transmissions and charges customers a total of $600,000.   Also during 2014, Clark performs warranty work and in doing so incurs costs totaling $5,600. 


a)    Determine the amount of warranty expense to appear in the year-end 12/31/14 income statement, and

b)    Determine the amount of estimated warranty liability to appear in the 12/31/14 balance sheet.


  1. Assume that on 1/01/2014 Filbeck Corp issues 4 year bonds with a face value of $5 mil and a stated interest rate of 7% with interest payable annually on 12/31 and maturing on 12/31/2017.


Provide amortization tables similar to those in Exhibit 5.1 assuming that:

a)    the market rate at issuance was 7%,

b)    the market rate at issuance was 6%,

c)    the market rate at issuance was 8%.



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