#1). Alternative Financing Plans

Folmar Co. is considering the following alternative financing plans:

	Plan 1		Plan 2
Issue 10% bonds (at face value)	$1,280,000		$640,000
Issue preferred $1 stock, $10 par			1,060,000
Issue common stock, $5 par	1,280,000		860,000

Income tax is estimated at 40% of income.

Determine the earnings per share on common stock, assuming income before bond interest and income tax is $768,000.

Enter answers in dollars and cents, rounding to the nearest cent.

Plan

_________ $ Earnings per share on common stock

Plan

_________ $ Earnings per share on common stock Issuing Bonds at a Discount #2). On the first day of the fiscal year, a company issues a $2,200,000, 10%, 9-year bond that pays semiannual interest of $110,000 ($2,200,000 10% ), receiving cash of $1,855,728. Journalize the bond issuance. If an amount box does not require an entry, leave it blank. #3). Premium Amortization On the first day of the fiscal year, a company issues a $8,400,000, 7%, 7-year bond that pays semiannual interest of $294,000 ($8,400,000 7% ), receiving cash of $9,382,034. Journalize the first interest payment and the amortization of the related bond premium. #4). Discount Amortization On the first day of the fiscal year, a company issues a $2,900,000, 10%, 6-year bond that pays semiannual interest of $145,000 ($2,900,000 10% ), receiving cash of $2,656,867. Journalize the first interest payment and the amortization of the related bond discount.