Question 1) Record the following journal entry: Poquito Corporation issued 30,00

Question

Question 1) Record the following journal entry:

Poquito Corporation issued 30,000 shares of its $5 par value common stock for $360,000 cash on August 1, 2010.

Question 2) The following information relates to the number of common shares of the Telly Corporation:

80,000 Authorized shares



30,000 Unissued shares



5,000 Treasury shares

Calculate the number of outstanding shares from the information given. Show your calculations.


Question 3) When will a bond sell for a discount?

When will a bond sell for a premium?

Question 4) What is the future value (maturity value) of a $5,000 note payable with interest at 8% compounded annually. The note is due in 5 years. The principle and all of the interest will be paid at the end of the 5 years. The time value of money tables are on pages 448-451 in your text.

Explanation / Answer

Question 1) Record the following journal entry:

Poquito Corporation issued 30,000 shares of its $5 par value common stock for $360,000 cash on August 1, 2010.

            Cash-------------360000 Dr

                          Common stock---------------360000   Cr

              (Being issue on new common stock)

Question 2) The following information relates to the number of common shares of the Telly Corporation:

80,000 Authorized shares
30,000 Unissued shares
5,000 Treasury shares

Calculate the number of outstanding shares from the information given. Show your calculations.

Only 80,000 Authorized shares is outstanding shares

Explanation:-

Stock currently held by investors, including restricted shares owned by the company's officers and insiders, as well as those held by the public. Shares that have been repurchased by the company are not considered outstanding stock

This includes all stock held by public investors and company insiders. Stock in the company's treasury is not considered outstanding.



Question 3)

Bonds can be sold for more and less than their par values because of changing interest rate. Like most fixed income security, bonds are highly correlated to interest rates. When interest rates go up, a bond's market price will fall and vice versa

When will a bond sell for a discount?

whenever the going rate of interest rises above the coupon rate, a fixed rate bond's price will fall below it pare value and it is called a discount bond

When will a bond sell for a premium?

Whenever the going interest rate falls below the coupon rate, a fixed rate bond's price will rise above it par value and it is called a premium bond.

Question 4) What is the future value (maturity value) of a $5,000 note payable with interest at 8% compounded annually. The note is due in 5 years. The principle and all of the interest will be paid at the end of the 5 years. The time value of money tables are on pages 448-451 in your text.

               Fv = A*CVFA n, i

future value = 5000*5.867

                      = 29335

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