Please solve these six questions with solution.

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P1. Coyote Construction, Inc. employs 20 individuals who work 8 hours a day and are paid hourly. Each employee earns one day paid sick leave and one day paid vacation a month if he or she works full-time in the month. Vacations earned in one year can be used in the following years while sick leaves can be used as they are earned. The following information pertains to vacation earned in 2017 and used in 2018.

Vacations Vacations

Earned in 2017 used in 2018

210 days 160days

The average pay rates are $13/hour in 2017 and $15/hour in 2018.

Instructions: prepare any necessary journal entries for

1) Vacations earned in 2017.

2) Vacations used in 2018.

P2. The following information pertains to the payrolls of COYOTE Company for November 2018:

Employees Wage earned Wage earned Federal Income State/local

By 10/31/2018 in November 2018 Tax Income Taxes

Jane $105,000 $12,000 $1,500 $650

Tom 60,000 7,000 500 250

Bill 6,000 1,200 0 0

Actual state unemployment tax rate is 4%, while the federal unemployment tax rate is 1%. The taxable income limit for social security tax is $110,000/person, year, while the taxable income limit of SUTA and FUTA is $7,000/ person, year.

Instructions: Prepare the necessary journal entries for November payrolls of COYOTE Company if salaries and wages are paid in cash after withholding all payroll taxes and dues.

P3. Hawk, Inc. sold ten heavy production machines with 2-year warranties for $300,000 each in 2018. At the end of 2018, it was estimated that the total warranty costs be $60,000 for the machines sold in 2018. Actual warranty costs incurred in2018 were $27,000 and will be $20,000, and $11,000 in 2019 and 2020, respectively.

Instructions: Prepare any necessary journal entries for

1) The estimated total warranty costs on 12/31/2018,

2) The actual warranty costs incurred in 2018, 2019, and 2020.

P4. Coyote sold 10,000 shares of $1,000 par value, 6%, 5-year debenture bonds on 1/1/2017. The bonds will pay interests on 12/31 of each year. The market interest rate was 8% as of 1/1/2017. Coyote retired these bonds for $9,580,000 on 1/1/2019.

Instructions: prepare any necessary journal entries for the followings using the effective interest method.

1) The issuance of the bonds.

2) Interest expense accrued in 2017 and 2018.

3) Retirement of the bonds on 1/1/2019.

P5. The following information pertains to stock transactions of Hawk, Inc. during 2018.

On 1/11/2018, Hawk issued 1,000,000 shares of common stock for $110/share. Its par is $100/share.

On 7/1/2018, Hawk reacquired 100,000 shares of its common stock at $98/share.

On 7/15/2018, Hawk reacquired 80,000 shares of its common stock at $101/share.

On 8/1/2018, Hawk sold 110,000 shares of the treasury stock for $106/share.

On 11/1/2018, Hawk sold 50,000 shares of the stock reacquired for $90/share.

On 12/31/2018, Hawk retired the remaining 20,000 shares of the stock reacquired.

Instructions: Prepare any necessary journal entries for the above transactions using the LIFO flow

assumption and the cost method.

P6. On December 31, 2018, Hawk Company presented the following data.

· Net income after income tax and interest expenses $2,400,000.

· Common stock (C/S)with $100 par:

# of shares outstanding as of 1/1/2018 600,000

# of shares issued for cash on 7/1/2018 400,000

# of shares reacquired on 10/1/2018 (Tresury stocks) 120,000

· 400, 000 shares of 4% Convertible Preferred stock (P/S) with $50/share par value.

Conversion ratio to C/S = 2 for 1; i.e., two shares of P/S will become one share of C/S

· The income tax rate is 30%.

· Hawk issued 2,000 shares of $1,000 par value, 8%, 5 year convertible bonds for $1,000 per share on January 1, 2018. The interests are payable annually at the end of each year. Each $1,000 bond can be converted to 10 shares of common stock within five years from 1/1/2018.

· None of these convertible securities have been converted to date.

· On December 31, 2016, Hawk adopted a stock option plan that granted options to key

executives to purchase 20,000 shares of common stock for $40/share.

None of these options have been exercised to date. The expected average service period of the stock option beneficiary was four years from 12/31/2016. The average market price of Hawk’s common stock in 2018 was $120/share.

Instructions:

1) Compute Simple EPS for 2018.

2) Compute Diluted EPS for 2018.

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