ACCTG 1B Chapter CH. 12 Long-Term Liabilities: Bonds & Notes:
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Alternative Financing Plans
Folmar Co. is considering the following alternative financingplans:
Plan 1 | Plan 2 | |||
Issue 10% bonds (at face value) | $1,400,000 | $700,000 | ||
Issue preferred $1 stock, $10 par | â | 1,160,000 | ||
Issue common stock, $5 par | 1,400,000 | 940,000 |
Income tax is estimated at 40% of income.
Determine the The profitability ratio of net income available tocommon shareholders to the number of common sharesoutstanding.earnings per share on common stock, assuming incomebefore A form of an interest-bearing note used by corporations toborrow on a long-term basis.bond interest and income tax is$1,120,000.
Enter answers in dollars and cents, rounding to the nearestcent.
Plan 1 | $ Earnings per share on common stock |
Plan 2 | $ Earnings per share on common stock |
Fridley Manufacturing's accounting records reveal the following account balances after adjusting entries are made on December 31, 2018:
Accounts payable | $ 62,500 | |
Bonds payable (9.4%, due in 2025) | 800,000 | |
Lease liability* | 41,500 | |
Bonds payable (8.7%, due in 2021) | 50,000 | |
Deferred tax liability* | 133,400 | |
Discount on bonds payable (9.4%, due in 2025) | 12,600 | |
Income tax payable | 26,900 | |
Interest payable | 38,700 | |
Installment note payable (8% equal installments due 2019 to 2022) | 120,000 | |
Notes payable (7.8%, due in 2023) | 400,000 | |
Premium on notes payable (7.8%, due in 2023) | 6,100 | |
Zero coupon note payable, $50,000 face amount, due in 2024 (net of discount) | 31,900 |
* Long-term liability
Required:
Prepare the current liabilities and long-term debt portions of Fridley's statement of financial position at December 31, 2018. Provide a separate line item for each issue (do not combine separate bonds or notes payable), but some items may need to be split into more than one item.
Fridley Manufacturing | ||
Liabilities Section of the Statement of Financial Position | ||
December 31, 2018 | ||
Liabilities | ||
Current liabilities: | ||
Accounts payable | $ | |
Interest payable | ||
Income tax payable | ||
Current portion of installment note | ||
Total current liabilities | $ | |
Long-term liabilities: | ||
Bonds payable: | ||
Bonds payable (8.7%, due in 2021) | ||
Bonds payable (9.4%, due in 2025) | $ | |
Less: Discount on bonds payable | ||
Notes payable: | ||
Notes payable (7.8%, due in 2023) | $ | |
Add: Premium on notes payable | ||
Installment note payable (8%) | ||
Note payable (4%, due in 2024) | $ | |
Less: Discount on note payable | ||
Other long-term liabilities: | ||
Lease liability | ||
Deferred tax liability | ||
Total liabilities | $ |