Question
51. On January 1, a company issues bonds dated January 1 with a par value of $580,000. The bonds mature in 5 years. The contract
51. On January 1, a company issues bonds dated January 1 with a par value of $580,000. The bonds mature in 5 years. The contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The market rate is 7% and the bonds are sold for $555,871. The journal entry to record the second interest payment using the effective interest method of amortization is:
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Debit Interest Expense $15,344.52; debit Discount on Bonds Payable $2,055.48; credit Cash $17,400.00.
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Debit Interest Expense $15,344.52; debit Premium on Bonds Payable $2,055.48; credit Cash $17,400.00.
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Debit Interest Expense $19,527.42; credit Discount on Bonds Payable $2,127.42; credit Cash $17,400.00.
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Debit Interest Payable $17,400.00; credit Cash $17,400.00.
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Debit Interest Expense $19,455.48; credit Discount on Bonds Payable $2,055.48; credit Cash $17,400.00.
58. Sweet Companys outstanding stock consists of 1,800 shares of cumulative 5% preferred stock with a $100 par value and 11,800 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared | ||
year 1 | $ | 3,800 |
year 2 | $ | 6,200 |
year 3 | $ | 41,000 |
The amount of dividends paid to preferred and common shareholders in year 3 is:
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$41,000 preferred; $0 common.
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$17,000 preferred; $24,000 common.
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$0 preferred; $41,000 common.
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$9,000 preferred; $32,000 common.
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$27,000 preferred; $14,000 common.
62. Marwick Corporation issues 12%, 5 year bonds with a par value of $1,030,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%. What is the bond's issue (selling) price, assuming the following Present Value factors:
n= | i= | Present Value of an Annuity | Present value of $1 | |||||
5 | 12 | % | 3.6048 | 0.5674 | ||||
10 | 6 | % | 7.3601 | 0.5584 | ||||
5 | 10 | % | 3.7908 | 0.6209 | ||||
10 | 5 | % | 7.7217 | 0.6139 | ||||
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$819,244
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$1,030,000
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$1,109,518
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$1,507,201
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$552,799
65. Eastline Corporation had 11,500 shares of $5 par value common stock outstanding when the board of directors declared a stock dividend of 3,795 shares. At the time of the stock dividend, the market value per share was $15. The entry to record this dividend is:
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Debit Common Stock Dividend Distributable $56,925; credit Retained Earnings $56,925.
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Debit Retained Earnings $56,925; credit Common Stock Dividend Distributable $56,925.
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No entry is needed.
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Debit Retained Earnings $56,925; credit Common Stock Dividend Distributable $18,975; credit Paid-In Capital in Excess of Par Value, Common Stock $37,950.
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Debit Retained Earnings $18,975; credit Common Stock Dividend Distributable $18,975.
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