Entries for Installment Note Transactions

On the first day of the fiscal year, Shiller Company borrowed $22,000 by giving a five-year, 12% installment note to Soros Bank. The note requires annual payments of $6,207, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $2,640 and principal repayment of $3,567.

Journalize the entries to record the following:

a1. Issued the installment note for cash on the first day of the fiscal year.

a2. Paid the first annual payment on the note. For a compound transaction, if an amount box does not require an entry, leave it blank.

b. Explain how the notes payable would be reported on the balance sheet at the end of the first year.

Notes payable are reported as liabilities on the balance sheet. The portion of the note payable that is due within is reported as a . The remaining portion of the note payable that is not due within one year is reported as a(n) .

1. Effect of Financing on Earnings Per Share

   Three different plans for financing an $7,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income:

   		Plan 1		Plan 2		Plan 3
   10% Bonds		_		_		$3,500,000
   Preferred 5% stock, $80 par		_		$3,500,000		1,750,000
   Common stock, $7 par		$7,000,000		3,500,000		1,750,000
   	Total	$ 7,000,000		$ 7,000,000		$ 7,000,000

   Required:

   1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $14,000,000. Enter answers in dollars and cents, rounding to two decimal places.

   	Earnings Per Share on Common Stock
   Plan 1	$
   Plan 2
   Plan 3

   2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $6,650,000. Enter answers in dollars and cents, rounding to two decimal places.

   	Earnings Per Share on Common Stock
   Plan 1	$
   Plan 2
   Plan 3

   3. The principal of Plan 1 is that it involves only the issuance of common stock, which does not require a periodic interest payment or return of principal, and a payment of preferred dividends required.

please answer both- if you cannot please answer first one