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general business data bank

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Question;BE 170;Layton Inc. is considering two alternatives to;finance its construction of a new $5 million plant.;(a) Issuance of 500,000;shares of common stock at the market price of $10 per share.;(b) Issuance of $5 million, 9%;bonds at par.;Instructions;Complete the following table.;Issue;Stock Issue Bonds;Income before interest and taxes $2,000,000 $2,000,000;Interest expense from bonds;Income before income taxes $ $;Income tax expense (30%);Net income $________ $;Outstanding shares _________ 700,000;Earnings per share;Outstanding shares (b) 1,200,000 700,000;Earnings per share (a)? (b) $1.17;$1.55;BE 171;On January 1, 2012, Morris Enterprises;issued 9%, 5-year bonds with a face amount of $800,000 at par. Interest is payable semiannually on June 30;and December 31.;Instructions;Prepare the entries to record the;issuance of the bonds and the first semiannual interest payment.;BE 172;On January 1, 2012;Bose Company issued bonds with a face value of $800,000. The bonds carry a;stated interest of 7% payable each January 1 and July 1.;Instructions;a. Prepare;the journal entry for the issuance assuming the bonds are issued at 95.;b. Prepare;the journal entry for the issuance assuming the bonds are issued at 105.;BE 173;On July 1, 2012, Frog Corporation;issued $600,000, 8%, 10-year bonds at face value. Interest is payable;semiannually on January 1 and July 1. Frog Corporation has a calendar year end.;Instructions;Prepare all entries related to the bond issue for;2012.;BE 174;On January 1, 2012, Zappa Enterprises sold 8%, 20-year bonds with a;face amount of $1,000,000 for $950,000.;Interest is payable semiannually on July 1 and January 1.;Instructions;Calculate the carrying value of the bond at;December 31, 2012 and 2013.;BE 175;Queen Company issued bonds with a face amount of;$1,600,000 in 2007. As of January 1, 2012, the balance in Discount on Bonds;Payable is $4,800. At that time, Queen redeemed;the bonds at 102.;Instructions;Assuming that;no interest is payable, make the entry to record the redemption.;BE 176;Roxy Inc. issues a $1,300,000, 10%, 10-year mortgage;note on December 31, 2012, to obtain financing for a new building. The terms;provide for semiannual installment payments of $106,291.;Instructions;Prepare the entry to record the mortgage loan on December 31, 2012, and;the first installment payment....................................................................................... 106,291;BE 177;Fresh Corporation reports the;following selected financial statement information at December 31, 2012;Total Assets $120,000;Total Liabilities 75,000;Net Income 20,000;Interest Revenue 1,600;Interest Expense 800;Income Tax Expense 400;Instructions;Calculate the;debt to total assets and times interest earned ratios.;BE 178;On January 1, 2012, Tape Enterprises issued 9%;10-year bonds with a face amount of $900,000 at 96. Interest is payable;semiannually on June 30 and December 31.;The bonds were issued for an effective interest rate of 10%.;Instructions;Prepare the entries to record the;issuance of the bonds and the first semiannual interest payment assuming that;the company uses effective-interest amortization.;BE 179;On January 1, 2012, Hogan Enterprises;issued 8%, 20-year bonds with a face amount of $5,000,000 at 101. Interest is payable semiannually on June 30;and December 31.;Instructions;Prepare the entries to record the;issuance of the bonds and the first semiannual interest payment assuming that;the company uses straight-line amortization.;EXERCISES;Ex. 180;Sophia Company is;considering two alternatives to finance its purchase of a new $4,000,000 office;building.;(a) Issue 400,000 shares of common stock at $10;per share.;(b) Issue 8%, 10-year bonds at par ($4,000,000).;Income before;interest and taxes is expected to be $3,000,000. The company has a 30% tax rate;and has 600,000 shares of common stock outstanding prior to the new financing.;Instructions;Calculate each of the following for each alternative;(1) Net income.;(2) Earnings per share.;Ex. 181;The board of directors of Moore Corporation is;considering two plans for financing the purchase of new plant equipment. Plan;#1 would require the issuance of $5,000,000, 6%, 20-year bonds at face value.;Plan #2 would require the issuance of 100,000 shares of $5 par value common;stock which is selling for $40 per share on the open market. Moore Corporation;currently has 100,000 shares of common stock outstanding and the income tax;rate is expected to be 35%. Assume that income before interest and income taxes;is expected to be $500,000 if the new factory equipment is purchased.;Ex. 181 (Cont.);Instructions;Prepare a schedule which shows the;expected net income after taxes and the earnings per share on common stock;under each of the plans that the board of directors is considering.;Ex. 182;Slotkin Health is considering two alternatives;for the financing of some high technology medical equipment. These two;alternatives are;1. Issue 50,000 shares of $10 par;value common stock at $50 per share.;2. Issue $3,000,000, 10%, 10-year;bonds at par.;It is estimated that the company will earn;$900,000 before interest and taxes as a result of acquiring the medical;equipment. The company has an estimated tax rate of 40% and has 80,000 shares;of common stock outstanding prior to the new financing.;Instructions;Determine the;effect on net income and earnings per share for these two methods of financing.;Ex. 183;Three plans for financing a $20,000,000;corporation are under consideration by its organizers. 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, the expected net income;and the earnings per share on common stock.;Ex. 184;Korean Corporation issued $2 million, 10-year, 6% bonds;on January 1, 2012.;Instructions;Prepare the entry to record the sale of these bonds;assuming they were issued at;(a) 97.;(b) 104.;Ex. 185;On January 1, 2012, Lost Corporation issued $800,000;8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and;January 1. Lost Corporation has a calendar year end.;Instructions;Prepare all;entries related to the bond issue for 2012.

 

Paper#45016 | Written in 18-Jul-2015

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