1. Smith Co, is considering the following alternative plans for financing their company: Plan I Plan II Issue 5% Bonds (at face) - $2,000,000 Issue Preferred 6% Stock, $20 par $4,000,000 $1,000,000 Issue Common Stock, $10 par $2,000,000 $3,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,500,000. Plan I Plan II Earnings Before bond interest and income tax Bond interest expense Income before taxes Income tax Net income Dividends on preferred stock Earnings available for common stock Number of common shares Earnings per share 2. On the first day of the fiscal year, a company issues a $1,000,000, 8%, 10 year bond that pays semi-annual interest of $40,000 ($1,000,000 ? 8% ? 1/2), receiving cash of $967,000 Journalize the entry to record the issuance of the bonds. Date Description Debit Credit 3. On the first day of the fiscal year, a company issues a $700,000 6%, 5 year bond that pays semi-annual interest of $21,000 ($700,000 ? 6% ? 1/2), receiving cash of $645,000. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar. Date Description Debit Credit 4. On the first day of the fiscal year, a company issues a $600,000, 5%, 10 year bond that pays semi-annual interest of $15,000 ($600,000 ? 5% ? 1/2), receiving cash of $660,000. Journalize the entry to record the issuance of the bonds. Date Description Debit Credit 5. On the first day of the fiscal year, a company issues a $300,000, 6%, 10 year bond that pays semi-annual interest of $9,000 ($300,000 ? 6% ? 1/2), receiving cash of $330,000 Journalize the entry to record the first interest payment and amortization of premium using the straight-line method. Date Description Debit Credit 6. A $525,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $475,000. Journalize the redemption of the bonds. Date Description Debit Credit 7. On January 1, 2010, Yeargan Company obtained an $100,000, five year 3% installment note from Farmers Bank. The note requires annual payments of $23,000, with the first payment occurring on the last day of the fiscal year. The first payment consists of $8,200 interest and principal repayment of $14,800.. Requirement: (1) Journalize the following entries: a. Issued the installment notes for cash on January 1, 2010. b. Paid the first annual payment on the note. (2) Determine the amount of interest expense on the note for the first year. Date Description Debit Credit

Other 1. Smith Co, is considering the following alternative plans for financing their company: Plan I Issue 5% Bonds (at face) Issue Preferred 6% Stock, $20 par Issue Common Stock, $10 par Plan II - $4,000,0 00 $2,000,00 0 $1,000,000 $2,000,00 0 $3,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,500,000. Plan I Plan II Earnings Before bond interest and income tax Bond interest expense Income before taxes Income tax Net income Dividends on preferred stock Earnings available for common stock Number of common shares Earnings per share 2. On the first day of the fiscal year, a company issues a $1,000,000, 8%, 10 year bond that pays semiannual interest of $40,000 ($1,000,000 8% 1/2), receiving cash of $967,000 Journalize the entry to record the issuance of the bonds. Date Description Debit Credit 3. On the first day of the fiscal year, a company issues a $700,000 6%, 5 year bond that pays semiannual interest of $21,000 ($700,000 6% 1/2), receiving cash of $645,000. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar. Date Description Debit Credit 4. On the first day of the fiscal year, a company issues a $600,000, 5%, 10 year bond that pays semiannual interest of $15,000 ($600,000 5% 1/2), receiving cash of $660,000. Journalize the entry to record the issuance of the bonds. Date Description Debit Credit 5. On the first day of the fiscal year, a company issues a $300,000, 6%, 10 year bond that pays semiannual interest of $9,000 ($300,000 6% 1/2), receiving cash of $330,000 Journalize the entry to record the first interest payment and amortization of premium using the straight-line method. Date Description Debit Credit 6. A $525,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $475,000. Journalize the redemption of the bonds. Date Description Debit Credit 7. On January 1, 2010, Yeargan Company obtained an $100,000, five year 3% installment note from Farmers Bank. The note requires annual payments of $23,000, with the first payment occurring on the last day of the fiscal year. The first payment consists of $8,200 interest and principal repayment of $14,800.. Requirement: (1) Journalize the following entries: a. Issued the installment notes for cash on January 1, 2010. Paid the first annual payment on the note. b. (2) Date Determine the amount of interest expense on the note for the first year. Description Debit Credit