| E10-9 Northeast Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. <\/p>\n These two alternatives are:<\/p>\n 1. <\/strong>Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid nor is the payment of<\/p>\n any contemplated.)<\/p>\n 2.<\/strong>Issue 10%, 10-year bonds at par for $2,700,000.<\/p>\n It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase.<\/p>\n The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the<\/p>\n new financing.<\/p>\n Instructions<\/p>\n Determine the effect on net income and earnings per share for these two methods of financing.<\/p>\n E10-10 On January 1, Neuer Company issued $500,000, 10%, 10-year bonds at par. Interest is<\/p>\n payable semiannually on July 1 and January 1.<\/p>\n Instructions<\/p>\n Present journal entries to record the following.<\/p>\n (a)<\/strong>The issuance of the bonds.<\/p>\n (b)<\/strong>The payment of interest on July 1, assuming that interest was not accrued on June 30.<\/p>\n (c)<\/strong>The accrual of interest on December 31<\/p>\n E10-11 On January 1, Flory Company issued $300,000, 8%, 5-year bonds at face value.<\/p>\n Interest is payable semiannually on July 1 and January 1.<\/p>\n Instructions<\/p>\n Prepare journal entries to record the following events.<\/p>\n (a)<\/strong>The issuance of the bonds.<\/p>\n (b)<\/strong>The payment of interest on July 1, assuming no previous accrual of interest.<\/p>\n (c)<\/strong>The accrual of interest on December 31.<\/p>\n E10-15 Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable to<\/p>\n finance the construction of a building at December 31, 2011. The terms provide for semiannual<\/p>\n installment payments of $20,000 on June 30 and December 31.<\/p>\n Instructions<\/p>\n Prepare the journal entries to record the mortgage loan and the first two installment payments.<\/p>\n *E10-18 Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for<\/p>\n $562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable<\/p>\n semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize<\/p>\n bond premium or discount.<\/p>\n Instructions<\/p>\n Prepare the journal entries to record the following. (Round to the nearest dollar.)<\/p>\n (a)<\/strong>The issuance of the bonds.<\/p>\n (b)<\/strong>The payment of interest and the discount amortization on July 1, 2011, assuming that interest<\/p>\n was not accrued on June 30.<\/p>\n (c)<\/strong>The accrual of interest and the discount amortization on December 31, 2011.<\/p>\n *P10-8A Soprano Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2011. The bonds<\/p>\n were dated January 1 and pay interest July 1 and January 1. Soprano Electric uses the straightline<\/p>\n method to amortize bond premium or discount. The bonds were sold at 104. Assume no<\/p>\n interest is accrued on June 30.<\/p>\n Instructions<\/p>\n (a)<\/strong>Prepare the journal entry to record the issuance of the bonds on January 1, 2011.<\/p>\n (b)<\/strong>Prepare a bond premium amortization schedule for the first 4 interest periods.<\/p>\n (c)<\/strong>Prepare the journal entries for interest and the amortization of the premium in 2011 and<\/p>\n 2012.<\/p>\n (d)<\/strong>Show the balance sheet presentation of the bond liability at December 31, 2012.<\/i><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":" E10-9 Northeast Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1. Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-75391","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/75391","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=75391"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/75391\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=75391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=75391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=75391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} |