Problem 1: A Company is planning to obtain funds through long-term debt issue of bonds. You are required to explain with example the following.
A. Any two types of bonds.
B. Under what conditions of bond issuance does a discount and premium on bonds payable arise?
C. Explain effective-interest basis method of amortizing discount and premium on bonds payable?
Problem 2: ABC Co issued $100,000 of 8% term bonds on January 1, 2013, due on January 1, 2018, with interest payable each July 1 and January 1. Investors require an effective-interest rate of 10%. Calculate the bond proceeds and record the issuance and amortization of the discount.
Problem 3: The summarized stamen of financial position of XYZ co Ltd at a particular point of time is as follows:
Statement of the Financial Position
Particulars Amount in Omani Rial (OMR)
|
Particulars
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Amount in Omani Rial (OMR)
|
|
Net Assets Value (Various assets less Liabilities)
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470,000
|
|
|
|
|
Equity
|
|
|
Share Capital (200,000 shares of OMR 1 each)
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200,000
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|
Share premium account
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60,000
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Revaluation Reserve
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74,000
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Retained Earnings
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136,000
|
|
Total Equity
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470,000
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|
Transaction
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|
Without any other transactions occurring at the same time, the company made a one for five rights share issue at OMR 3 per share payable in cash. All shareholders took up their rights. Immediately afterwards, the company made a one for two bonus issue.
You are required do the following things:
Show the statement of financial position immediately following the bonus issue, assuming that the directors wanted to retain the maximum dividend payment potential for the future.
Define Right Issue and Bonus Issue. How these issue are different form Public Issue.
Ahmed has 200 equity shares of the aforesaid company before Right and Bonus issue. Now what will be total shareholding of Ahmed after bonus and right issues? What is the total value of Ahmed's share before and post right and bonus issue?
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