On January 1, Year 1, DPH, Co. issued a $3,500,000, 5 year bond.Interest will be paid on June 30 and December 31 each year. Thebond has a stated rate of 5% and was issued at 98. Ignore theeffects of taxes for this problem.
31.
(6 points) Make the journal entry for the issuance of thebond.
32.
(16 points) Make the journal entries for the first two interestpayments, assuming that DPH uses the effective interestmethod for amortizing any premiums or discounts on theirdebt. The effect interest rate on the bonds was 5.5%
33.
(15 points) On July 1, Year 4, DPH decided to retire 10% of thebonds in order to avoid violating a debt covenant on their majorline of credit. On that day, the bonds were selling at 101. Makethe journal entry to record the early retirement, assumingthat DPH, Co. uses the straight-line method for amortizingany premiums or discounts on their debt.
34.
(22 points) On August 31st, Year 4, the bonds were selling at97. Because of the good price, DPH decided to retire an additional30% of the bond. Make any necessary journal entries to record therepurchase. Assume that the market price includes anyaccrued interest and that DPH is still using the straight-linemethod.
35.
(16 points) Before recording the bond retirements, DPH reportedthe following information:
Net Sales
$ 8,000,000
Net Income
$ 1,200,000
Current Assets
$ 1,800,000
Total Assets
$ 9,000,000
Current Liabilities
$ 1,350,000
Total Liabilities
$ 6,300,000
Calculate the company's ROA, Debt-to-Equity, and Current Ratiosbefore and after the debt retirement. Assume all other necessaryentries, including any interest on the bonds, have been properlyrecorded. (HINT: Since you don't have beginning values, just usethe ending values for those ratios requiring averages!)
Use the following to answer questions 36-41:
At the end of last year, Tull Co. submitted paperwork to switchfrom a sole proprietor ship to a corporation. Just prior to yearend, the company received final authorization from the state ofIdaho to incorporate. In the articles of incorporation, Tull, Inc.is authorized to issues 1,000,000 shares of $2 par common stock. OnDecember 31st, Mrs. Tull received 250,000 shares of common stock inexchange for her equity in the sole proprietorship.
36.
(3 points) Make the journal entry to record Tull's first equityoffering on January 15th of the current year. The company issued150,000 shares at par value.
37.
(5 points) Make the journal entry to record an additional equityoffering on June 1st. The company issued 60,000 shares for $8 pershare.
38.
(3 points) On August 15th, Tull decided to repurchase 15,000shares of common stock in order to improve stock price. Make theappropriate journal entry to record the repurchase if the marketprice for Tull common stock on that day was $6 per share.
39.
(6 points) On November 11th, Tull's management decided that thestock price had increased sufficiently for them to reissue 7,500shares of their treasury stock. Make the entry to record thereissue of these shares if the stock price was $17 per share.
On January 1, Year 1, DPH, Co. issued a $3,500,000, 5 year bond.Interest will be paid on June 30 and December 31 each year. Thebond has a stated rate of 5% and was issued at 98. Ignore theeffects of taxes for this problem.
31. | (6 points) Make the journal entry for the issuance of thebond. |
32. | (16 points) Make the journal entries for the first two interestpayments, assuming that DPH uses the effective interestmethod for amortizing any premiums or discounts on theirdebt. The effect interest rate on the bonds was 5.5% |
33. | (15 points) On July 1, Year 4, DPH decided to retire 10% of thebonds in order to avoid violating a debt covenant on their majorline of credit. On that day, the bonds were selling at 101. Makethe journal entry to record the early retirement, assumingthat DPH, Co. uses the straight-line method for amortizingany premiums or discounts on their debt. |
34. | (22 points) On August 31st, Year 4, the bonds were selling at97. Because of the good price, DPH decided to retire an additional30% of the bond. Make any necessary journal entries to record therepurchase. Assume that the market price includes anyaccrued interest and that DPH is still using the straight-linemethod. |
35. | (16 points) Before recording the bond retirements, DPH reportedthe following information:
Calculate the company's ROA, Debt-to-Equity, and Current Ratiosbefore and after the debt retirement. Assume all other necessaryentries, including any interest on the bonds, have been properlyrecorded. (HINT: Since you don't have beginning values, just usethe ending values for those ratios requiring averages!) |
Use the following to answer questions 36-41:
At the end of last year, Tull Co. submitted paperwork to switchfrom a sole proprietor ship to a corporation. Just prior to yearend, the company received final authorization from the state ofIdaho to incorporate. In the articles of incorporation, Tull, Inc.is authorized to issues 1,000,000 shares of $2 par common stock. OnDecember 31st, Mrs. Tull received 250,000 shares of common stock inexchange for her equity in the sole proprietorship.
36. | (3 points) Make the journal entry to record Tull's first equityoffering on January 15th of the current year. The company issued150,000 shares at par value. |
37. | (5 points) Make the journal entry to record an additional equityoffering on June 1st. The company issued 60,000 shares for $8 pershare. |
38. | (3 points) On August 15th, Tull decided to repurchase 15,000shares of common stock in order to improve stock price. Make theappropriate journal entry to record the repurchase if the marketprice for Tull common stock on that day was $6 per share. |
39. | (6 points) On November 11th, Tull's management decided that thestock price had increased sufficiently for them to reissue 7,500shares of their treasury stock. Make the entry to record thereissue of these shares if the stock price was $17 per share. |
