1. A firm issues its 10-year, 9%, $500,000 Par value bonds at a selling price of
ID: 2501064 • Letter: 1
Question
1. A firm issues its 10-year, 9%, $500,000 Par value bonds at a selling price of 92 percentages. The company uses the straight-line method to amortize bond premiums and discounts. The bonds pay interest semi-annually.
a)What is the bond price?
b)Record the sale of the bond:
c)Record the first interest payment
d)Record the second interest payment.
e)Record the final payment of the Face Value
2-On January 1st of this year, the stockholder's equity section in the Slate Gravel Co. consisted of the following items:
Common Stock, $1 par value, 1 million shares
Authorized, 300,000 shares issued & outstanding $300,000
Paid in Capital in Excess of Par (APIC) 100,000
Retained earnings 500,000
Total Stockholder's equity.......... $900,000
Based on the information above, prepare journal entries in the spaces below to record the following transactions. Use good General Journal form, but you may omit explanations:
April 4 Issued 10,000 shares of stock at $15.00 per share.
June 20 The board of directors declared a $1.00 per share cash dividend payable July 15 to the July 10 stockholder's of record.
July 15 Paid the cash dividend previously declared.
July 22 Issued 5,000 shares of stock for $10.00 per share.
Dec. 18 The board of directors declared a $0.10 per share cash dividend payable January 5th, of next year to the January 1st, stockholder's of record.
3-Prepare Cash Flow statement for SMART Corporation under Direct method using the following information:
Beginning Cash balance 12,000
Cash collected from sales 10,000
Cash collected issuance of bond 20,000
Cash receipt from sell of equipment 5,000
Cash receipt from sell of stock 8,000
Salary payments for employees 4,000
Tax payments 2,500
Dividend payments 1,000
Company bought Furniture’s 1,500
PREPARE CASH FLOW STATEMENT
Explanation / Answer
a. Bond Price= 500000*92% = 460000 Discount= 500000-460000=40000 b)To Record the sale of the bond: Cash 460000 Discount on Bonds Payable 40000 Bonds Payable 500000 c)Record the first interest payment Interest Expense 24500 Discount on Bonds Payable 2000 Cash 22500 d)Record the second interest payment Interest Expense 24500 Discount on Bonds Payable 2000 Cash 22500 e)Record the final payment of the Face Value Bonds payable 500000 Cash 500000 Account Titles Debit Credit Apr-04 Cash 10000*15 150000 Common Stock 10000*1 10000 APIC 10000*14 140000 Jun-20 Retained earnings 310000*1 310000 Dividends Payable 310000 Jul-15 310000 Dividends Payable 310000 Cash July 22 Cash 5000*10 50000 Common Stock 5000*1 5000 APIC 5000*9 45000 Dec. 18 Retained earnings 315000*0.10 31500 Dividends Payable 31500 3-Cash Flow statement for SMART Corporation under Direct method Cash flows from Operating Activities Cash collected from sales 10000 Salary payments for employees -4000 Tax payments -2500 Net cash from operating activities 3500 Cash flows from Investing Activities Cash receipt from sale of equipment 5000 Cash receipt from sale of stock 8000 Company bought Furniture’s -1500 Net cash from Investing activities 11500 Cash flows from Financing Activities Cash collected issuance of bond 20000 Dividend payments -1000 Net cash from Financing activities 19000 Beginning Cash Balance 12000 Ending cash balance 46000
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