Bond Premium, Entries for Bonds Payable Traneactions Rodgers Corporation produces and selis football equipment. On July 1, Year 1, Rodgers Corporation issued $72,100,000 of 10 -yeac, 13\% bonds at a markat (effective) interest rate of 11%, recelving cash of $80,716,289. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscat year of the company is the calendar year. Required: for all journal entries, If an amount box does not require an entry, leave it blank. 1. Joumalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1 . faedbect T Cwack Mr wat Bonds Dayoble is alwoys recorded at foce value. Any difference in issue price is reflected in a premium or discount account. 2. Journalize the entries to record the following: a. The fint semiannual intereat payment on December -31, Year 1 , and the amortization of the bond premium, using the straight-fine method. Round to the nearest doltar. r creck My wen Bonds Payable is always recerded at face value. Any difference in issue price is reflected in a premium or discount acceunt. The straight-line method of amprtization provides equal amounts of amortization over the life of the bond. 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Wilt the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $80,716,289 received for the bonds by using Present value at compound interest, and Present value of aniannuity. Round to the neares dolfar. Your total may vary slightly from the price given due to rounding differences. Effect of Financing on Earnings fer share Three different plans for financing an $4,900,000 corporation are under consideration by its organizers. Under each of the foliowing plans, the secunties wil be issued at their par or face amount, and the income tax rate is estimated at 40% of income: 1. Determine the camings per share of common stock for each plan, assuming that the income before bond interest and income tox is $9,800,000. Enter answers in dollars and cents, rounding to two decimal places. 2. Determine the earnings per share of common stock for each plan, assuming that the incocne before bend interes and income tax is s4,655, 000. Enter answers in dollars and cents, rounding to two decimal places. Earnings Per. Share on 2. Determine the eamings per share of common stock for each plan, assuming that the income before bond interest and income tax is $4,655,000. Enter answers in dollars and cents, rounding to two decimal places. 3. The peincipal V of Plan 1 is that it involves only the issuance of common stock, which does not require a periodic interest pavment or return of principal, and a payment of preferred dividends required. faestesi F Check Hy work Set up a column for each plan. Remember to take interent, income tax and dividends into consideration. Consider the impoct on sharehokders with each plan. In deciding among financing plans, the effect on eamungs per share is aften considered, keep in mind usues of what obligations the firm must poy even during periods of earnings decines
