Problem 1:
Perfect Systems borrows $94,000 cash on May 15, 2011, by signing a 60-day, 12% note.
1. On what date does this note mature?
2. Suppose the face value of the note equals $94,000, the principal of the loan. Prepare the journal entries to record (a) issuance of the note and (b) payment of the note at maturity.
Problem 2:
On January 1, 2011, Kidman Enterprises issues bonds that have a $1,700,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par.
1. How much interest will Kidman pay (in cash) to the bondholders every six months?
2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2011; (b) the first interest
payment on June 30, 2011; and (c) the second interest payment on December 31, 2011.
3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 98 and (b) 102.
Problem 3:
Ramirez Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000, and total assets of $620,000.
1. Compute Ramirez's (a) present debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $500,000 to fund the project.
2. Evaluate and discuss the level of risk involved if Ramirez borrows the funds to pursue the project
Problem 4:
Aloha Corporation issues 6,000 shares of its common stock for $144,000 cash on February 20. Prepare journal entries to record this event under each of the following separate situations.
1. The stock has neither par nor stated value. 2. The stock has a $20 par value. 3. The stock has an $8 stated value
Problem 5:
Compute the price-earnings ratio for each of these four separate companies. Which stock might an analyst likely investigate as being potentially undervalued by the market? Explain
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Company
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Earnings per Share
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Market Value per Share
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1
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$10.00
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$166.00
|
|
2
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$9.00
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$90.00
|
|
3
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$6.50
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$84.50
|
|
4
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$40.00
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$240.00
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