Problem 1. Villarente Company issued 5-year $200,000 face value bonds at 95 on January 1,
2012. The stated interest rate on these bonds is 9%, and the effective interest rate is 10.33%. Use
the effective interest rate method to complete the amortization schedule below.

Cash
Payment
January 1, 2012
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
Totals

Interest
Expense

Discount
Amortization

Carrying
Value

Problem 2. Allen Corporation was organized on July 15, 2012. It was authorized to issue
150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred
stock. The preferred stock had a stated value of $50 per share. The following stock transactions
relate to Allen Corporation.

Issued 55,000 shares of common stock for $33 per share.
Issued 2,750 shares of the class A preferred stock for $62 per share.
Issued 27,500 shares of common stock for $35 per share.

Required:
1) Indicate the effect of each of these transactions on Allen’s financial statements. Include dollar
amounts in the model, below. After recording the three transactions, calculate column totals.
2) After these transactions have been recorded, what is the total amount of stockholders’ equity?
3) After these transactions have been recorded, how many shares of common stock are
outstanding?

Assets
Cash
=
Equity
Common + Paid-in Capital + Preferred
Stock
in Excess of
Stock
Par Value

Cash Flow
+ Paid-in
Capital in
Excess of
Stated Value

Problem 1. Villarente Company issued 5-year $200,000 face value bonds at 95 on January 1,
2012. The stated interest rate on these bonds is 9%, and the effective interest rate is 10.33%. Use
the effective interest rate method to complete the amortization schedule below.

Cash
Payment
January 1, 2012
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
Totals

Interest
Expense

Discount
Amortization

Carrying
Value

Problem 2. Allen Corporation was organized on July 15, 2012. It was authorized to issue
150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred
stock. The preferred stock had a stated value of $50 per share. The following stock transactions
relate to Allen Corporation.

Issued 55,000 shares of common stock for $33 per share.
Issued 2,750 shares of the class A preferred stock for $62 per share.
Issued 27,500 shares of common stock for $35 per share.

Required:
1) Indicate the effect of each of these transactions on Allen’s financial statements. Include dollar
amounts in the model, below. After recording the three transactions, calculate column totals.
2) After these transactions have been recorded, what is the total amount of stockholders’ equity?
3) After these transactions have been recorded, how many shares of common stock are
outstanding?

Assets
Cash
=
Equity
Common + Paid-in Capital + Preferred
Stock
in Excess of
Stock
Par Value

Cash Flow
+ Paid-in
Capital in
Excess of
Stated Value