Reference no: EM131043813
1. Flaming Lip Corporation has 25,000 shares outstanding of 12% $15 par value, cumulative preferred stock. In 2009 and 2010, no dividends were declared on preferred stock. In 2011, Flaming Lip had a profitable year and decided to pay dividends to stockholders of both preferred and common stock.
If Flaming Lip has $200,000 available for dividends in 2011, how much could it pay to the preferred and common stockholders?
2. Hot Company issued $500,000 of 5-year, 9% bonds at 96 on January 1, 2012. The bonds pay interest twice a year.
(a) Prepare the journal entry to record the issuance of the bonds.
(b) Prepare the journal entry to record the first interest payment
(c) Repeat the requirements from part (a), assuming the bonds were issued at 105.
3. Freckle Company issued $500,000 of bonds for $521,000. Interest is paid semiannually.
a. Prepare the necessary journal entry to record the issuance of the bonds.
b. Is the market rate greater or less than the stated rate? How do you know?
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: Prepare the journal entry to record the issuance of the bonds. Prepare the journal entry to record the first interest payment Repeat the requirements from part (a), assuming the bonds were issued at 105.
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