Advanced Financial Accounting – Spring 2026 – Midterm

Qus.1: Describe briefly the following: [CLO 1; Level 2] [5*1=5] i) Outstanding share, ii) Cash dividend, iii) Capital lease, iv) Circuit Breaker, v) Incremental borrowing rate Qus.2: On January 1, 2025, Ehan Finance Limited signed an agreement to lease machine to Rohan Company. The information related to this agreement were as follows: * The cost of the asset to the lessor is $6,00,000, and its fair value as of January 1, 2025, is also $6,00,000. * The lease term is 5 years with no renewable option. The estimated economic life of the machine is 5 years. * The appropriate party has to pay repair expense of $3,000 per year. * The agreement requires equal annual rental payments, beginning on January 1, 2025. * The lessee has committed to make the payments on time, while the lessor has taken the necessary steps to make the asset leasable. * The implicit rate is 10% p.a. Instructions: [CLO 2; Level 3] (i) Use the above information in preparing an amortization schedule for the lessor for the lease term.[6] (ii) Use the information of amortization schedule in preparing the journal entries for the lessor for 2025, and 2026. [4] Qus.3: On January 1, 2024, Mehazabien Company issued $12,00,000 of 10-year, 8% convertible debentures for $12,46,000. Interest is to be paid semi-annually on June 30 and December 31. Each $500 debenture can be converted into three shares of Mehazabien Company $100 par value common stock. On January 1, 2025, 25% of debentures were converted into common stock, which was then selling at $105. An additional $80,000 of debentures were converted on April 30, 2025. The market price of the common stock was then $104. Accrued interest at April 30, 2025 had been paid on the next payment date. Instructions: Examine the above information in preparing journal entries for: [CLO 3; Level 4] [10] (i) January 1, 2024 (ii) June 30, 2024 (iii) January 1, 2025 (iv) April 30, 2025 (v) June 30, 2025