Reference no: EM132597369
Questions -
Q1- Frey Co. is considering the following alternative financing plans:
Plan 1 Plan 2
Issue 10% bonds (at face value) $1,040,000 $520,000
Issue preferred $1 stock, $10 par - 860,000
Issue common stock, $5 par 1,040,000 700,000
Income tax is estimated at 40% of income.
Determine the earnings per share on common stock, assuming that income before bond interest and income tax is $312,000.
Q2- On January 1, the first day of the fiscal year, a company issues a $300,000, 4%, 10-year bond that pays semiannual interest of $6,000 ($300,000 × 4% × ½ year), receiving cash of $300,000.
a- Journalize the entry to record the issuance of the bonds.
b- Journalize the entry to record the first interest payment on June 30.
c- Journalize the entry to record the payment of the principal on the maturity date.
Q3- On the first day of the fiscal year, a company issues a $2,800,000, 8%, 6-year bond that pays semiannual interest of $112,000 ($2,800,000 × 8% × ½), receiving cash of $2,551,829.
Journalize the bond issuance.
Q4- On the first day of the fiscal year, a company issues a $3,100,000, 12%, 4-year bond that pays semiannual interest of $186,000 ($3,100,000 × 12% × ½), receiving cash of $2,827,636.
Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar.
Q5- On the first day of the fiscal year, a company issues a $3,100,000, 9%, 9-year bond that pays semiannual interest of $139,500 ($3,100,000 × 9% × ½), receiving cash of $3,296,220.
Journalize the bond issuance.
Q6- On the first day of the fiscal year, a company issues a $3,000,000, 6%, 6-year bond that pays semiannual interest of $90,000 ($3,000,000 × 6% × ½), receiving cash of $3,317,259.
Journalize the first interest payment and the amortization of the related bond premium. Round to the nearest dollar.
Q7- A $860,000 bond issue on which there is an unamortized premium of $83,000 is redeemed for $823,000.
Journalize the redemption of the bonds.
Q8- On the first day of the fiscal year, a company issues $39,000, 10%, four-year installment notes that have annual payments of $12,303. The first note payment consists of $3,900 of interest and $8,403 of principal repayment.
a- Journalize the entry to record the issuance of the installment notes.
b- Journalize the first annual note payment.
Q9- Berry Company reported the following on the company's income statement in two recent years:
Current Year Prior Year
Interest expense $400,000 $480,000
Income before income tax expense 4,720,000 4,992,000
a- Determine the number of times interest charges were earned for current Year and prior Year. Round to one decimal place.
b- Is the number of times interest charges are earned improving or declining?