Question

How would you write these journal entries?

1. DFC acquired $400,000 of SeBASS, INC 3% Bonds at face (par) value during fiscal 2018. The bonds pay interest semi-annually on February 1^st and August 1^st. DFC correctly classified the bonds as Available-for-Sale Securities (AFS).
2. On June 1, 2019, DFC put a new roof on the administrative building. The cash cost of the new roof was $48,000 and is expected to add 13 years to the life of the building from the date of installation. The firm also repainted the exterior of the building. The cash cost of the painting, which the firm does every three years, was $9,000.
3. Annual liability insurance premiums are payable on January 1^st of each year. The premium amount paid in January 2020 was $39,600.
4. On May 31, 2020, DFC sold Sales Building 2 for $110,000. The firm received payment in cash.
5. At May 31, 2020, the SeBASS 3% bonds have a fair market value of $406,000.
6. During May 2020, SeBASS paid $16,400 cash to acquire its own shares. These shares were correctly classified as Treasury Shares.
7. During April 2020, SeBASS’s board of directors declared $293,000 of dividends. At May 31, 2020, the Dividend Payable account balance was $1,900.

Additional information:

1. The firm uses the periodic inventory system.
2. Ignore income taxes

Danover Fiber Composites
Balance Sheet
May 31, 2019
Assets
Cash			$         62,000
Accounts receivable	$      129,000
Allowance for doubtful accounts	(10,300)
Accounts receivable, net			118,700
Interest receivable			4,000
Inventories			110,000
Prepaid insurance			20,300
Total Current Assets			315,000
Investment in SeBASS Bonds (AFS)			398,000
Property, Plant and Equipment, gross	$   1,670,000
Accumulated depreciation	(864,000)
Property, Plant and Equipment, net			806,000
Total Assets			$    1,519,000
Liabilities and Shareholders' Equity
Accounts payable			$         87,500
Salaries payable			17,000
Dividends payable			2,600
Total Current Liabilities			107,100
Long-term note payable			450,000
Total Liabilities			557,100
Common stock, no par			375,000
Retained Earnings			691,900
Accumulated Other Comprehensive Income			(2,000)
Treasury stock			(103,000)
Total Shareholder's Equity			961,900
Total Liabilities and Shareholder's Equity			$    1,519,000

Answer 1

Solution:

Journal Entries