I. On March 1 20x2, Pyne Furniture Co. issued $700,000 of 10% bonds to yield 8%. Interest is payable semiannually on February 28 and August 31. The bonds mature in 10 years. Pyne is a calendar-year corporation.
1. Determine the issue price of the bonds.
2. Prepare an amortization table through the first 5 years.
3. Prepare the journal entries to record bond-related transactions as of the following dates:
(a) March 20x2
(b) August 31, 20x2
(c) December 31, 20x2
(d) February 28, 20x3
II. Metro Company reported the following amounts in the stockholders’ equity section of its balance sheet on 12/31/x1, first year of operations:
Preferred stock, 10%, $100 par (10,000 shares
Authorized, 2,000 shares issued) .......... $200,000
Common stock, $5 par (100,000 shares authorized,
20,000 shares issued) ................ 100,000 Paid-in Capital in Excess of Par – Common ....... 125,000 Retained Earnings ..................... 450,000
Total ..................... $875,000
During 20x2 and 20x3, Metro took part in the following transactions concerning stockholders’ equity.
1. Declared and paid the annual dividends of $50,000 for 20x2. The preferred stock is cumulative. Metro did not pay any dividend in 20x1. Divide the dividend between preferred stock and common stock, and make journal entries for each dividend.
2. Purchased 1,700 shares of its own outstanding common stock for $35 per share. Metro uses the cost method.
3. Reissued 700 treasury shares for land valued at $30,000.
4. Issued 500 shares of preferred stock at $106 per share.
5. Declared a 10% stock dividend on common stock when the stock is selling for $39 per share.
6. Issued the stock dividend.
7. Declared the annual dividends for 20x3: annual dividend on preferred stock and $1 per share dividend on common stock. These dividends are payable in 20x4. Prepare two separate journal entries; common and preferred dividend each.
(a) Prepare journal entries for these transactions.
(b) Prepare the 12/31/03, stockholders’ equity section. Assume 20x3 net income was $305,000 ($0 for 20x2).
(c) On January 1, 20x1, Wilk Corp. had 480,000 shares of common stock outstanding. During 20x1, it had the following transactions that affected the common stock account.
2/1 Issued 120,000 shares
3/1 Declared and distributed a 10% stock dividend
5/1 Acquired 100,000 shares of treasury stock
6/1 Issued a 3-for-1 stock split
10/1 Reissued 60,000 shares of treasury stock
Wilke Corp. earned net income of $3,456,000 during 20x1. In addition, it had 100,000 of shares of 9%, $100 par nonconvertible, cumulative preferred stock outstanding for the entire year. Because of liquidity considerations, the company did not declare and pay a preferred dividend in 20x1. Compute EPS for 20x1.
(d) Venz Company’s net income for 20x1 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issued during 20x0, each exercisable for one share at $6. None has been exercised, and 10,000 shares of common were outstanding during 20x1. The average market price of Venz’s stock during 20x1 was $20.