I. On March 1 20 x 2, Pyne Furniture Co. issued $700,000 of 10% bonds to yield 8%. Interest is payable semiannually on February 28 and August 31. The bonds mature in 10 years. Pyne is a calendar year corporation.
Required:
1. Determine the issue price of the bonds.
2. Prepare an amortization table through the first 5 years.
3. Prepare the journal entries to record bond related transactions as of the following dates:
(a) March 20 x 2
(b) August 31, 20 x 2
(c) December 31, 20 x 2
(d) February 28, 20 x 3
II. Metro Company reported the following amounts in the stockholders' equity section of its balance sheet on 12/31/x1, first year of operations:
Preferred stock, 10%, $100 par (10,000 shares
Authorized, 2,000 shares issued) ..........$200,000
Common stock, $5 par (100,000 shares authorized,
20,000 shares issued) ................$100,000
Paid in Capital in Excess of Par Common .......$125,000
Retained Earnings .....................$450,000
Total .....................$875,000
During 20 x 2 and 20 x 3, Metro took part in the following transactions concerning stockholders' equity.
1. Declared and paid the annual dividends of $50,000 for 20 x 2. The preferred stock is cumulative. Metro did not pay any dividend in 20 x 1. Divide the dividend between preferred stock and common stock, and make journal entries for each dividend.
2. Purchased 1,700 shares of its own outstanding common stock for $35 per share. Metro uses the cost method.
3. Reissued 700 treasury shares for land valued at $30,000.
4. Issued 500 shares of preferred stock at $106 per share.
5. Declared a 10% stock dividend on common stock when the stock is selling for $39 per share.
6. Issued the stock dividend.
7. Declared the annual dividends for 20 x 3: annual dividend on preferred stock and $1 per share dividend on common stock. These dividends are payable in 20 x 4. Prepare two separate journal entries; common and preferred dividend each.
Required:
(a) Prepare journal entries for these transactions.
(b) Prepare the 12/31/03, stockholders' equity section. Assume 20 x 3 net income was $305,000 ($0 for 20 x 2).
(c) On January 1, 20 x 1, Wilk Corp. had 480,000 shares of common stock outstanding. During 20 x 1, it had the following transactions that affected the common stock account.
2/1 Issued 120,000 shares
3/1 Declared and distributed a 10% stock dividend
5/1 Acquired 100,000 shares of treasury stock
6/1 Issued a 3 for 1 stock split
10/1 Reissued 60,000 shares of treasury stock
Wilke Corp. earned net income of $3,456,000 during 20 x 1. In addition, it had 100,000 of shares of 9%, $100 par nonconvertible, cumulative preferred stock outstanding for the entire year. Because of liquidity considerations, the company did not declare and pay a preferred dividend in 20 x 1. Compute EPS for 20 x 1.
(d) Venz Company's net income for 20 x 1 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issued during 20 x 0, each exercisable for one share at $6. None has been exercised, and 10,000 shares of common were outstanding during 20 x 1. The average market price of Venz's stock during 20 x 1 was $20.