Prob 1 - FETA GROUP EQUITY

FETA Group has the following items in its equity section of the balance sheet:

Common Stock 5,000,000 shares authorized, 1,200,000 issued$6,000,000

Capital Surplus$3,600,000

Treasury Stock on Common100,000 shares$1,320,000

Cumulative Preferred Stock 17,000,000 authorized {8%} $2 par$12,000,000

Treasury Stock on Preferred Stock250,000 shares$5,000,000

Retained Earnings$30,180,000

1. FETA Group wishes to announce a total cash dividend of $4,000,000.How is this dividend to be divided between the common and preferred stockholders?

1. FETA Group was four years in the arrears in paying dividends to the preferred stockholders.In the current announcement to all shareholders, FETA Group revealed that the company's total dividend payout this would be $10,000,000.If this is the case, then what is the total dollar amount of dividends for preferred shareholders and common shareholders?

1. How many shares of FETA Group common stock are outstanding?

1. How many shares of FETA Group preferred stock are outstanding?

1. What was the average selling price of FETA Group's common stock shares Listed on the current balance sheet?

1. What was the average selling price of FETA Group's preferred stock shares listed on the current balance sheet?

1. If FETA Group announces a 4 for 1 stock split of the cumulative preferred, then what is the new total amount of the preferred stock?

1. If FETA Group were to provide for a 10% common stock dividend, then how many new shares are to be mailed to existing common stock shareholders?

1. Assume in question [8] the market price of the common stock was $26 at the time of the stock dividend announcement. What is the journal entry to record the stock dividend?

1. What is total dollar amount of equity per the items listed on the current balance listed on the top of this page?

Prob 2 - HCH INC.BONDS

HCH Inc. is short on cash and wishes to offer a 20 year $5,000,000,000 bond with a 6% contract rate of interest. Unfortunately for HCH Inc., the current market rate for bonds of this magnitude is around an average of 10%. Interest of course is paid semi-annually.Please the following questions regarding HCH's bond offering.

1.Calculate the cash proceeds of HCH's bond offering?

2.What is the total amount of interest paid in cash each year?

3.What is the total amount of interest paid over the life of the bonds?

4.What is the amount of interest charged during the first full year that the bonds were outstanding?

5.If HCH wanted to pay off the bonds at the end of the first year, it is estimated the company would have to write-a check for $5,500,000,000.Provide the complete Journal Entry for such a transaction.

1. Economists have forecasted the market rate of interest to decrease in a short period of time.In fact, as low as 4%, and HCH wishes for you calculate the cash proceeds of the bond offering if the market rate of interest is 4%.

1. What is the initial journal entry to record this second bond fact pattern?

1. What is the total interest paid for each year on this second bond fact pattern?

1. What is the total interest listed as an expense on HCH's income statement?

1. Explain the following concept:As rate of interest rises bond prices fall and when rates of interest decrease bond prices rise?

We shall ignore risk factors in the question.