Question
Ivanhoe Co. receives $303,600 when it issues a $303,600, 10%, mortgage note payable to finance the construction of a building at December 31, 2022. The
Ivanhoe Co. receives $303,600 when it issues a $303,600, 10%, mortgage note payable to finance the construction of a building at December 31, 2022. The terms provide for annual installment payments of $50,600 on December 31. Prepare the journal entries to record the mortgage loan and the first two payments. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Wildhorse Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:
1. | Issue 102,300 shares of common stock at $30 per share. (Cash dividends have not been paid nor has the payment of any contemplated.) | |
2. | Issue 10%, 10-year bonds at face value for $3,069,000. |
It is estimated that the company will earn $725,500 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 20% and has 117,500 shares of common stock outstanding prior to the new financing. Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.)
On January 1, 2022, Oriole Inc. entered into an agreement to lease 20 computers from Drummond Electronics. The terms of the lease agreement require three annual rental payments of $36,000 (including 10% interest) beginning December 31, 2022. The present value of the three rental payments is $89,525. Oriole considers this a finance lease. Prepare the journal entry to record the lease agreement on the books of Oriole Inc. on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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