Problem 1: LIABILITIES:
The following items are extracted "in a random order" from the accounting records of MST Corp for the period ended December 31, 2002
Accounts payable 65,600
Accrued Liabilities 11,347
6 % Bonds payable, due Feb 1, 2003 100,000
8% Bonds payable, due June 1, 2003 250,000
Unamortized bond discount (8% bonds of 2003) 260
11% Bond payable, due June 1, 2012 300,000
Unamortized bond premium (11% bonds of 2012) 1,700
Accrued interest payable 7,333
Bond interest expense 61,000
Other interest expense 17,000
Notes payable (short-term) 110,000
Lease payment obligations - Capital lease 23,600
Pension obligation 410,000
Unfunded obligations for post retirement benefits 72,000
Deferred Income tax 130,000
Income Tax expense 66,900
Income Tax payable 17,300
Operating Income 280,800
Net Income 134,700
Total assets 2,093.300
Other information
1. The 6% Bonds due in Feb 2003 will be refinanced in Jan 2003 through the issuance of $ 150,000 in 9%, 20 years bonds.
2. The 8% Bonds due June 2003 will be repaid entirely.
3. MST Corp is committed to total lease payments of $ 14,400 in 2003. Of this amount, $ 7,479 is applicable to operating leases and $ 6,921 to capital leases. Payments on capital leases will be applied as follows: $ 2,300 to interest expense and $ 4.621 to reduction in the capitalized lease payment obligation.
4. MST pension plan is fully funded with an independent trustee.
5. The obligation for postretirement benefits other than pensions consists of a commitment to maintain health insurance for retired employees. During 2003, MST will fund $ 18,000 of this obligation.
6. The $ 17,300 income tax payable relates to income tax of 2002 and must be paid on or before March 15, 2003. No portion of the deferred tax liability is regarded as a current liability.
INSTRUCTIONS
1. Using this information, prepare the current and long term liabilities sections of the balance sheet as of Dec 31, 2002.
2. Explain briefly how the information in each of the six paragraphs will affect your presentation of the company's liabilities and the net income of 2003
Problem 2: EQUITY:
Early in 2000, ABC Corp. was organized with authorization to issue 100,000 shares of 100 par value preferred stock and 500,000 shares of 1 par value common stock. Ten thousand shares of preferred stock were issued at par and 170,000 shares of common stock were sold for 15 per share. The preferred stock pays an 8% cumulative dividend and is callable at 105.
During the first 4 years of operations, the corporation earned a total of 1,025,000 and paid dividends of 0.75 per share each year on its outstanding common stock
Q1. Prepare the stockholder's equity section of the Balance sheet at December 2003. Include a supporting schedule showing your computation of the amount of retained earnings reported
Q2. Are there any dividends in arrear on the company's preferred stock at the end of 2003? Explain your answer.