Reference no: EM133120686
Question 1 - On January 2, Dundar Mifflin acquired 30% of the outstanding stock of Steve & Company for $105,000. For the year ending, December 31, Steve & Company earned income of $68,000 and paid dividend $16,000.
Prepare the entries for Dundar Mifflin for the purchase of the stock, share of Steve & Company income and dividends received from Steve & Company.
Question 2 - Dundar Mifflin is considering the purchase of a new printer and has narrowed down the possibilities to two models which perform equally well. However, the method of paying for the two models is different. Model A requires $8,000 per year payment for the next five years. Model B requires the following payment schedule.
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Year
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Payment (Model 2)
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1
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$10,000
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2
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9,000
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3
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8,000
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4
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5,000
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5
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3,000
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1. Which model should you buy assuming a 12% rate?
Question 3 - Prepare the journal entries for the following transactions for Dundar Mifflin:
Dundar Mifflin purchased 1,200 shares of the total of 100,000 outstanding shares of Steve & Company stock for $20.75 per share plus a $70 commission.
Steve & Company total earnings for the period are $84,000.
Steve & Company paid a total of $40,000 in cash dividends to shareholders of record.
Question 4 - To expand its operation in Ontario, Dundar Mifflin has applied for a $3,500,000 loan from the TD Bank. According to Dundar Mifflin financial analyst, the company can only afford a maximum yearly loan payment of $1,000,000. The bank has offered Dundar Mifflin the following:
Option 1: 3 year loan with an 8 percent interest rate
Option 2: 4 year loan with a 10 percent interest rate
Option 3: 5 year loan with a 12 percent interest rate
1. Compute the loan payment under each option for year 1.
2. Which option should the company choose?
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