Question 1 - Salisbury Corporation formed a corporation on January 3, 2016, and is authorized to issue 500,000 shares of $10 par value common stock. The company has the following stock transactions.
1/10/2016 - Issued 200,000 shares of stock at $16 per share.
1/25/2016 - The law firm that helped the company incorporate and file all forms for the stock issue accepts 1,000 shares of newly issued stock in lieu of cash for its legal bill rendered. The amount of the legal bill was $20,000.
6/10/2016 - Salisbury Corporation declares a 50 cent per share dividend payable July 15 to shareholders of record as of June 30, 2016.
6/30/2016 - The record date for the dividend declared on June 10.
7/15/2016 - The dividend declared on June 10 is paid.
9/15/2016 - Salisbury Corporation declares a 10% stock dividend payable on September 30 to shareholders of record as of September 20. The market value of the stock was $15 immediately prior to the declaration of the stock dividend.
9/30/2016 - The stock dividend declared on September 15 is paid.
10/15/2016 - Salisbury Corporation buys 5,000 shares of its own stock on the open market for $18 per share.
12/18/2016 - Salisbury Corporation resells 2,000 shares of the treasury stock for $20 per share.
Journalize the above entries for Salisbury Corporation.
Question 2 - On July 1, 2016 Alpha Company sells $1,000,000 face value of 10% five year bonds which call for semiannual interest payments. The bonds are dated April 1, 2016 so these bonds are issued between interest dates. The market rate at the date of issue is also 10%. For simplicity, use a 360-day year and 3 day months for all calculations.
1. Record the journal entries for the issuance of the bonds
2. Record the journal entries for the first interest payment due on October 1, 2016. Assume that interest has not been accrued at each month end.
Question 3 - On April 1, 2016 Alpha Company sells $1,000,000 face value of 10% five year bonds which call for semiannual interest payments. The bonds are dated April 1, 2016 so these bonds are issued on an interest date. The market rate at the date of issue is 8%. Use the straight line method of amortization of any bond premium or discount. For simplicity, use a 360-day year and 3 day months for all calculations.
1. Record the journal entries for the issuance of the bonds
2. Record the journal entries for the first interest payment due on October 1, 2016. Assume that interest has not been accrued at each month end.