I.
Prepare journal entries for the following four events (use straight-line amortization).
01/01/07 The Def Co. issued $100,000, six year bonds, carrying a coupon rate of ten percent (10%), interest payable annually on December 31 each year. The bonds were issued at an effective yield (market rate) of seven percent (7%). Assume that the net proceeds from the issue of the bond differed from the face value of the bond by $12,000.
12/31/07 Recognize the first interest payment. 12/31/08 Recognize the second interest payment.
01/01/09 Redeem (i.e., buy back) twenty percent (20%) of the bonds outstanding for $18,500.
II.
Is it better for a company to issue bonds at a discount or at a premium? Explain your answer.
III.
Prepare journal entries for ABC Co.'s following events. 05/12/08 Received charter authorizing ABC Co. to issue 20,000 shares of common stock at a par value of $2 per share. 06/03/08 Issued 8,000 shares of stock, receiving $40,000. 06/04/08 Paid the law firm of Lo, Ball and Hyde for their services to help organize the company by sending them two thousand shares of stock.
11/15/08 Declared a cash dividend of $2 per share, payable on
01/15/09, to holders of record as of 12/15/08. 12/15/08 Make the appropriate entry.
12/31/08 Make any necessary adjusting entry.
01/15/09 Make the appropriate entry.
06/12/09 Declared a ten percent (10%) stock dividend, payable on 7/15/09 (ignore the date of record for this event). The market value of the stock is $15 per share.
07/15/09 Make the appropriate entry.
08/15/09 Declared a two-for-one stock split. The market value of the stock is $15 per share.
09/15/09 Declared and paid a cash dividend of $2 per share (pretend this happens all in one day).
10/01/09 Purchased 1,000 shares of treasury stock for a total price of $30,000.
10/15/09 Declared and paid a cash dividend of $2 per share. 11/15/09 Reissued 400 shares of treasury stock at $32 each.
12/15/09 Reissued the remaining treasury stock at $10 per share.
IV.
The stockholders' equity section on the 12/31/08 balance sheet of Wheat Corporation was:
Stockholders' Equity
Contributed capital:
Common stock, $?? par value, authorized 30,000 shares; issued 20,000 shares; outstanding 9,000 shares $27,000
Preferred stock, par value $50, authorized 20,000
shares; issued and outstanding, 10,000 shares 500,000
Contributed capital in excess of par, common 13,000
Contributed capital in excess of par, preferred 10,000
Contributed capital, treasury stock transactions 3,000
Retained Earnings 326,000
Cost of treasury stock, common 22,000
REQUIRED
1. What was the par value of the common stock?
2. What is the number of shares held as treasury stock?
3. If common stock was issued only once, what was the issue price per share?
4. How much did the treasury stock held cost per share?
5. How much is total stockholder' equity?
V.
Use the data from Problem VI. For the most recent year (2008) calculate the following ratios.
1. Current ratio
2. Inventory turnover
3. Rate of return on total assets
4. Accounts receivable turnover (assume all sales are on account)
5. Debt ratio.
VI.
Comparative balance sheets and an income statement for 2008 are presented below for Nroklesah Company.
Nroklesah Company
Comparative Balance Sheets and Income Statement For the Years 2007 and 2008
|
BALANCE SHEETS
|
|
|
|
Assets
|
2008
|
2007
|
|
cabn
|
200
|
185
|
|
Accounts receivable
|
350
|
290
|
|
Allowance for bad debts
|
(45)
|
(25)
|
|
Inventory
|
260
|
135
|
|
Land
|
600
|
500
|
|
Buildings
|
295
|
250
|
|
Accumulated depreciation-buildings
|
(65)
|
(80)
|
|
Total assets
|
1,595
|
1,255
|
|
Liabilities i Owners' Equity
|
|
|
|
Liabilities
|
|
|
|
Accounts payable
|
400
|
305
|
|
Wages payable
|
70
|
67
|
|
Dividends payable
|
30
|
47
|
|
Taxes payable
|
50
|
46
|
|
Long-term Bonds payable
|
100
|
100
|
|
Discount on bonds payable
|
( 8)
|
(10)
|
|
Total liabilities
|
642
|
555
|
|
Owners' Equity
|
|
|
|
Common stock
|
650
|
500
|
|
Retained earnings
|
303
|
200
|
|
Total owners' equity
|
953
|
700
|
|
Total liabilities i owners' equity
|
1,595
|
1,255
|
|
INCCHE STATEMENT (2008)
|
|
|
|
Revenue
|
|
1,200
|
|
Cost of goods sold
|
|
750
|
|
Gross margin
|
|
450
|
|
Operating expenses
|
|
|
|
Wage expense
|
200
|
|
|
Depreciation expense
|
30
|
|
|
Bad debt expense
|
20
|
|
|
Bond interest expense
|
10
|
|
|
Total operating expenses
|
|
260
|
|
Net operating income
|
|
190
|
|
Gain on sale of building
|
|
40
|
|
Net income before tax
|
|
230
|
|
Income tax
|
|
69
|
|
Net income after tax
|
|
161
|
|
Additional information
|
|
|
Additional information
1. There were no write-offs of delinquent accounts during the year.
2. A building was sold during the year for $80.
Required
Prepare a cash flow statement for 2008 with clear documentation (i.e., show your work) for each section of the statement. Use either the direct or the indirect method.
Attachment:- Behnam_fin.rar