Problem 1:
On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest each June 30 and December 31. On the issue date, the market rate of interest is 6%. Compute the price of the bonds on their issue date. The following information is taken from present value tables:
- Present value of annuity for 10 periods at 3% 8.5302
- Present value of annuity for 10 periods at 4% 8.1109
- Present value of 1 due in 10 periods at 3% 0.7441
- Present value of 1 due in 10 periods at 4% 0.6756
Problem 2: A corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 500,000 shares issued; Contributed Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record the following transactions:
Feb 15 The board of directors declared a 5% stock dividend to stockholders of record on March 1, to be issued on March 20. The stock was trading at $6 per share prior to the dividend.
MAR 1 The date of record
MAR 20 Issued the stock dividend
Problem 3: On January 1, 2007, a company issued 10-year, 10% bonds payable with a par value of $500,000, and received $442,647 in cash proceeds. The market rate of interest at the date of issuance was 12%. The bonds pay interest semiannually on July 1 and January 1. The issuer uses the straight-line method for amortization. Prepare the issuer's journal entry to record the first semiannual interest payment on July 1, 2007.
Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments.
DEC 21 Purchased inventory for Acquilla Co. for 500,000 Mexican pesos. The exchange rate was $0.0914 per peso. The credit terms were n/30.
DEC 31 The exchange rate was $0.0917 per peso.
JAN 20 Paid Acquilla Co. for the Dec 32 purchase. The exchange rate was $0.0920 per peso.