7 since the amount spent is for intangible asset ( Patent ) It has to be amortised over useful like instead of charging to Misc. Expsense . Patent account needs to be debited and mis expense need to be credited . Debit Patent 50,000 audit Jo Mix . expense 50POD2) 1, 000,000 of 81. convertible bonds . Interest to be paid = 1,000, 000 x 8 100 = 80,000 tax benefit = 80,000 x 25 = 20,000 Net outflow = 8 100 80 , 000 - 20,000 = 60,000 Revised Net profit = Gooooo - 60poo = 540000 - The earnings per share would be better than preferred stock option . (highest EPS compared to all there methods) $ 500,coo each of preferred stock + bonds. Preferred dividend : 5, 00,000 x 10 TOO = 50,0 00#bond interest - tan benefit / 5,00,000 X & - tax Male 100 40,000 (1 - 0.25 = 39000 Revised profil = 6,00,000 - 50,000 - 30,090 = 5, 20,000 The earnings per share would be better than prewired stock option but lower than full bond option\fheases since the ovens are taken on leave for byears and post which peyton will own them it will be considered as finance leare . Under finance leave the property taken on leave will be recorded as fixed aust, winstedad the recording the ment as expense. The ovens are recorded at PV of lease payments PV = ( orate, NPCR, Payment, FV, type) = ( 51 5, 20,000, 0, 0 ) PV =$ 1, 01, 513 . 84Debut ovens - Fixed asset Credit 1 1 01, 513. 84 Jo long term liability 101, 513 . 84 Every year the lease ment is paid and shown as reduction in liability and asset is depreciated in the books. other items -) Since the subair of the Packing machine extended the life of the machine the cast incurred coil need to be capitalized. Debut Fixed asset - Packing machine 27,000.00 credit Jo cash 27p40-0 0