Problem 1 - Bond issue price and premium amortization.

On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were soldto yield 12%. Table values are:

Present value of 1 for 10 periods at 10% ................................. .386

Present value of 1 for 10 periods at 12% ................................. .322

Present value of 1 for 20 periods at 5% ................................... .377

Present value of 1 for 20 periods at 6% ................................... .312

Present value of annuity for 10 periods at 10% ........................ 6.145

Present value of annuity for 10 periods at 12% ........................ 5.650

Present value of annuity for 20 periods at 5% .......................... 12.462

Present value of annuity for 20 periods at 6% .......................... 11.470

Instructions

(a) Calculate the issue price of the bonds.

(b) Without prejudice to your solution in part (a), assume that the issue price was $2,652,000.Prepare the amortization table for 2015, assuming that amortization is recorded on interest payment dates using the effective-interest method.

Problem 2 - Dividends on preferred and common stock.

Rensing, Inc., has $800,000 of 6% preferred stock and $1,200,000 of common stock outstanding,each having a par value of $10 per share. No dividends have been paid or declared during 2011and 2012. As of December 31, 2013, it is desired to distribute $396,000 in dividends.

Instructions

How much will the preferred and common stockholders receive under each of the following assumptions:

(a) The preferred is noncumulative and nonparticipating.

(b) The preferred is cumulative and nonparticipating.

(c) The preferred is cumulative and fully participating.

(d) The preferred is cumulative and participating to 12% total.

Problem 3 - Stock dividends.

The stockholders' equity section of Benton Corporation's balance sheet as of December 31, 2012is as follows:

Stockholders' Equity

Common stock, $5 par value; authorized, 2,000,000 shares;

issued, 400,000 shares $2,000,000

Paid-in capital in excess of par 850,000

Retained earnings 3,000,000

Total $5,850,000

The following events occurred during 2013:

1. Jan. 5 20,000 shares of authorized and unissued common stock were sold for $8 per share.

2. Jan. 16 Declared a cash dividend of 20 cents per share, payable February 15 to stockholders of record on February 5.

3. Feb. 10 30,000 shares of authorized and unissued common stock were sold for $12 per share. 4. March 1 A 30% stock dividend was declared and issued. Fair value per share is currently$15.

5. April 1 A two-for-one split was carried out. The par value of the stock was to be reduced to $2.50 per share. Fair value on March 31 was $18 per share.

6. July 1 A 15% stock dividend was declared and issued. Fair value is currently $10 per share. 7. Aug. 1 A cash dividend of 20 cents per share was declared, payable September 1 to stockholders of record on August 21.

Instructions

Enter the above events into the following work sheet showing how each event affects the column.Event No. 1 will serve as an example.

Common Stock

Item No. of share issued Total par value Paid in capital in RetainedEarnings

Excess of par

Begin Balance(1/1/13) 400,000 $2,000,000 $850,000 $3,000,000

Event #1Jan. 5 20,000 100,000 60,000 -0-

Balance 420,000 $2,100,000 $910,000 $3,000,000

Event # 2Jan. 16 (and events 3 through 7)