Assignment Acct 311
#1 On April 1, 2020, Davies Company purchased $600,000 of 6% bonds for $623,625 plus accrued interest as an available-for-sale security. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2025.
Instructions
(a) Prepare the journal entry on April 1, 2020
(b) The bonds are sold on November 1, 2021, at 103 plus accrued interest. Amortization was recorded when interest was received by the straight-line method (by months and round to the nearest dollar). Prepare all entries required to properly record the sale.
#2 On June 30, 2019, Arjangi Corporation sold $3,000,000 (face value) of bonds. The bonds are dated June 30, 2019, pay interest semiannually on December 31 and June 30, and will mature on June 30, 2022. The following schedule was prepared by the accountant for 2019.
Semi-Annual Interest to Interest Unamortized Bond
Interest Period be Paid Expense Amortization Amount Carrying Value
$75,000 $2,925,000
1 $120,000 $131,625 $11,625 63,375 1,936,625
Instructions
Answer the following questions. (Round your answer to the nearest dollar or percent.)
1. What is the stated interest rate for this bond issue?
2. What is the market interest rate for this bond issue?
3. What was the selling price of the bonds as a percentage of the face value?
4. Prepare the journal entry to record the sale of the bond issue on June 30, 2019.
5. Prepare the journal entry to record the payment of interest and amortization on December 31, 2019.
#3 Three plans for financing a $20,000,000 expansion are under consideration by the Burns Corporation. Under each of the following plans, the securities will be issued at their par or face amount and the income tax rate is estimated at 30%.
Plan 1 Plan 2 Plan 3
9% Bonds — — $10,000,000
6% Preferred Stock, $100 par — $10,000,000 5,000,000
Common Stock, $10 par $20,000,000 10,000,000 5,000,000
Total $20,000,000 $20,000,000 $20,000,000
It is estimated that income before interest and taxes will be $5,000,000.
Instructions
Determine for each plan:
(a) the expected net income
(b) the earnings per share on common stock.
SHOW ALL CALCULATIONS.
#4 Singer Inc., has $800,000 of 5% preferred stock and $1,200,000 of common stock outstanding, each having a par value of $10 per share. No dividends have been paid or declared during 2019 and 2020. As of December 31, 2021, it was desired to distribute $340,000 in dividends.
Instructions
How much will the preferred and common stockholders receive under each of the following assumptions:
(a) The preferred is noncumulative and nonparticipating.
(b) The preferred is cumulative and nonparticipating.
(c) The preferred is cumulative and fully participating.
#5 Asante Company's balance sheet shows:
Common stock, $20 par $3,000,000
Paid-in capital in excess of par 1,050,000
Retained earnings 750,000
Instructions
Record the following transactions by the cost method.
(a) Bought 6,000 shares of its common stock at $29 a share.
(b) Sold 3,000 treasury shares at $30 a share.
(c) Sold 1,500 shares of treasury stock at $26 a share.
#6 Presented below is information related to Cruz Martinez Company:
1. The company is granted a charter that authorizes issuance of 15,000 shares of $100 par value preferred stock and 40,000 shares of no-par common stock.
2. 8,000 shares of common stock are issued to the founders of the corporation for land valued by the board of directors at $300,000. The board establishes a stated value of $5 a share for the common stock.
3. 5,000 shares of preferred stock are sold for cash at $120 per share.
4. The company issues 100 shares of common stock to its attorneys for costs associated with starting the company. At that time, the common stock was selling at $60 per share.
Instructions
Prepare the general journal entries necessary to record these transactions or state “No entry necessary”.