Questions -
1. Peterson Co issued bonds on May 1, 2009. The face value of the bond is $340,000 and has a coupon rate of 8% per year. The market rate is 12% per year. Interest is paid semi-annually and it is a 4- year bond.
a. Record the issuance of the bond
b. Record the interest payment and amortization of bond/premium on October 31st, 2009 using the effective interest rate method.
c. On July 31st, 2010, the company retired the bonds at a price of 99. Record the retirement of the bond.
2. On May 1, the corporation borrowed $85,000 from a bank by signing a 10 percent interest -bearing note per year due three years from May 1. Record the journal entries on May 1, the interest payment 3 months later and any journal entries needed on December 31st. Interest is paid semi-annually.
3. Peterson Corporation had the following transactions during the year. Record the journal entries.
a. On Jan 10 issues 10,000 shares of common stock for cash at $7 per share. The par value is $4 per share
b. On Mar 1, Issued 2,000 shares of preferred stock at $15 per share. Par value is $10 per share and the dividend rate is 5%.
c. Issued 4,000 shares of common stock in exchange for land valued at $25,000 on July 31st.
d. Purchased 500 shares of treasury stock (common stock) at $8 per share on August 30th.
e. Sold 300 shares of treasury stock at $6 per share on November 1st.
f. Paid a 10% stock dividend to outstanding common shareholders on December 31st. Fair value of stock is $10 per share.
g. Paid a cash dividend of $5 per share of common stock.
h. Prepare the stockholder section of the Balance sheet if retained earnings are $850,000.
4. On March 1st, 2011 a company issued 800 of $100 bonds, each convertible into 4 shares of common stock at $10 par value. On December 31, the company converted the bonds into common stock when the unamortized discount was $10,000. Record the conversion of the stock.
5. During 2011, The company has net income of $1,400,000, convertible bonds of $1,000,000 ($1,000 per bond with a 6% coupon rate) into 5 shares of common stock each (par value $5), has common stock of $2 million purchased on January 2010. On April 30th, the company bought back 2,000 shares of common stock at a price of $8 per share. Compute EPS and Diluted EPS. Tax rate is 40%.