CHAPTER 11 #2 On the first day of its fiscal year, Chin Company issued $10,000,0
ID: 2401346 • Letter: C
Question
CHAPTER 11 #2
On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Chin receiving cash of $9,594,415. The fiscal year of the company is the calendar year.
Required:
a. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles):
b. Determine the amount of the bond interest expense for the first year.
c. Explain why the company was able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000.
1
Issuance of the bonds.
2
First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3
Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
CHAPTER 11 #6
Present Value of Amounts Due
Assume that you are going to receive $50,000 in 10 years. The current market rate of interest is 4%.
a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar.
$
b. Why is the present value less than the $50,000 to be received in the future?
The present value is less due to (inflation, deflation, compunding interest) over the 10 years.
CHAPTER 11 #7
Present Value of an Annuity
On January 1 you win $50,000,000 in the state lottery. The $50,000,000 prize will be paid in equal installments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 5%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar.
CHAPTER 11 #11
Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $22,000,000 of five-year, 9% bonds at a market (effective) interest rate of 7%, receiving cash of $23,829,684. Interest is payable semiannually. Shunda’s fiscal year begins on January 1. The company uses the interest method.
Required:
a. Journalize the entries to record the following transactions. Refer to the Chart of Accounts for exact wording of account titles.
b. Determine the bond interest expense for the first year.
c. Explain why the company was able to issue the bonds for $23,829,684 rather than for the face amount of $22,000,000.
1
Sale of the bonds.
2
First semiannual interest payment, including amortization of premium. Round to the nearest dollar.
3
Second semiannual interest payment, including amortization of premium. Round to the nearest dollar.
c. Explain why the company was able to issue the bonds for $23,829,684 rather than for the face amount of $22,000,000.
The bonds sell for more than their face amount because the market rate of interest is (<, >, =) the contract rate of interest. Investors (are, are not) willing to pay more for bonds that pay a higher rate of interest (contract rate) than the rate they could earn on similar bonds (market rate).
CHAPTER 11 #12
Compute the price of $26,625,925 received for the bonds by using the present value tables. (Round to the nearest dollar.)
present value of the face amount:_______
present value of the semiannual interest payments
price received for the bonds:$2,625,925
Two present value tables are provided: Present Value of $1 at Compound Interest Due in n Periods and Present Value of Ordinary Annuity of $1 per Period. Use them as directed in the problem requirements.
CHAPTER 11 #13
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
Required:
Determine the carrying amount of the bonds as of December 31, Year 2.
Chapter 12 #3
On January 22, Jefferson County Rocks Inc., a marble contractor, issued for cash 180,000 shares of $20 par common stock at $23, and on February 27, it issued for cash 25,000 shares of preferred stock, $7 par at $9.
Required:
a. Journalize the entries for January 22 and February 27. Refer to the Chart of Accounts for exact wording of account titles.
b. What is the total amount invested (total paid-in capital) by all stockholders as of February 27?
Chapter 12 #4
On May 15, Helena Carpet Inc., a carpet wholesaler, issued for cash 750,000 shares of no-par common stock (with a stated value of $1.50) at $4, and on June 30, it issued for cash 17,500 shares of preferred stock, $50 par at $60.
Required:
a. Journalize the entries for May 15 and June 30, assuming that the common stock is to be credited with the stated value. Refer to the Chart of Accounts for exact wording of account titles.
b. What is the total amount invested (total paid-in capital) by all stockholders as of June 30?
Chapter 12 #5
On November 23, Elder Lift Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 12,500 shares of $25 par common stock with a current market price of $38.
Journalize the entry to record the transaction. Refer to the Chart of Accounts for exact wording of account titles.
Chapter 12 #6
Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 50,000 shares of preferred 2% stock, $40 par and 1,000,000 shares of $8 par common stock. The following selected transactions were completed during the first year of operations:
Feb.
5
Issued 600,000 shares of common stock at par for cash.
5
Issued 1,500 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr.
9
Issued 45,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $100,000, $310,000, and $85,000 respectively.
June
14
Issued 30,000 shares of preferred stock at $53 for cash.
Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.
Chapter 12 #7
The declaration, record, and payment dates in connection with a cash dividend of $1,250,000 on a corporation’s common stock are July 9, August 31, and October 1.
Journalize the entries required on each date. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
Chapter 12 #8
Mystic Lake Inc. bottles and distributes spring water. On July 9 of the current year, Mystic Lake reacquired 40,000 shares of its common stock at $44 per share. On September 22, Mystic Lake sold 30,000 of the reacquired shares at $50 per share. The remaining 10,000 shares were sold at $43 per share on November 23.
Required:
a. Journalize the transactions of July 9, September 22, and November 23. Refer to the Chart of Accounts for exact wording of account titles.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
c. For what reasons might Mystic Lake Inc. have purchased the treasury stock?
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
$
c. For what reasons might Mystic Lake Inc. have purchased the treasury stock? Check all that apply.
To provide shares for resale to employees.
For reissuance to employees as a bonus according to stock purchase agreements.
To support the market price of the stock.
The company wishes to increase the par value of its stock.
The company wishes to receive more of its own dividends.
Chapter 12 #9
The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year:
1
Common stock, $45 par
$3,060,000.00
2
Paid-In Capital from Sale of Treasury Stock
115,000.00
3
Paid-In Capital in Excess of Par-Common Stock
272,000.00
4
Retained Earnings
20,553,000.00
Prepare the Stockholders’ Equity section of the balance sheet as of June 30. Eighty thousand shares of common stock are authorized, and 9,000 shares have been reacquired. Refer to the lists of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Chapter 12 #10
Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water reacquired 23,500 shares of its common stock at $75 per share. On September 6, Biscayne Bay Water sold 14,000 of the reacquired shares at $81 per share. The remaining 9,500 shares were sold at $72 per share on November 30.
Required:
a. Journalize the transactions of May 14, September 6, and November 30. Refer to the Chart of Accounts for exact wording of account titles.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?
Chapter 12 #12
Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y6, are as follows:
Common Stock, $20 stated value (500,000 shares authorized, 375,000 shares issued)
$7,500,000
Paid-In Capital in Excess of Stated Value—Common Stock
825,000
Retained Earnings
33,600,000
Treasury Stock (25,000 shares, at cost)
450,000
The following selected transactions occurred during the year:
Jan.
22
Paid cash dividends of $0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $28,000.
Apr.
10
Issued 75,000 shares of common stock for $24 per share.
Jun.
6
Sold all of the treasury stock for $26 per share.
Jul.
5
Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $25 per share.
Aug.
15
Issued shares of stock for the stock dividend declared on July 5.
Nov.
23
Purchased 30,000 shares of treasury stock for $19 per share.
Dec.
28
Declared a $0.10-per-share dividend on common stock.
31
Closed the credit balance of the income summary account, $1,125,000.
31
Closed the two dividends accounts to Retained Earnings.
Required:
1
Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed.
2
Journalize the entries to record the transactions, and post to the eight selected accounts. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles.
3
Prepare a retained earnings statement for the year ended December 31, 20Y6. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
4
Prepare the Stockholders’ Equity section of the December 31, 20Y6, balance sheet. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
* Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.
a. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles):
b. Determine the amount of the bond interest expense for the first year.
c. Explain why the company was able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000.
Present Value of $1 at Compound Interest Due in n Periods Periods 4.0 4.5% 6.5% 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458 2 0.92456 0.91573 0.90703 0.89845 0.89000 0.88166 0.8734 0.88900 0.87630 0.86384 0.85161 0.83962 0.82785 0.81630 0.85480 0.83856 0.82270 0.80722 0.79209 0.77732 0.76290 0.82193 0.80245 0.78353 0.76513 0.74726 0.72988 0.71299 0.79031 0.76790 0.74622 0.72525 0.70496 0.68533 0.66634 0.75992 0.73483 0.71068 0.68744 0.66506 0.64351 0.62275 0.73069 0.70319 0.67684 0.65160 0.62741 0.60423 0.58201 0.70259 0.67290 0.64461 0.61763 0.59190 0.56735 0.54393 0.67556 0.64393 0.61391 0.58543 0.55839 0.53273 0.5083 11 0.64958 0.61620 0.58468 0.55491 0.52679 0.50021 0.47509 0.62460 0.58966 0.55684 0.52598 0.49697 0.46968 0.4440 13 0.60057 0.56427 0.53032 0.49856 0.46884 0.44102 0.41496 14 0.57748 0.53997 0.50507 0.47257 0.44230 0.41410 0.38782 0.55526 0.51672 0.48102 0.44793 0.41727 0.38883 0.3624 16 0.53391 0.49447 0.45811 0.42458 0.39365 0.36510 0.33873 0.51337 0.47318 0.43630 0.40245 0.37136 0.34281 0.31657 18 0.49363 0.4528O 0.41552 0.38147 0.35034 0.32189 0.29586 0.47464 0.43330 0.39573 0.36158 0.33051 0.30224 0.2765 20 0.45639 0.41464 0.37689 0.34273 0.31180 0.28380 0.25842 21 0.43883 0.39679 0.35894 0.32486 0.29416 0.26648 0.24151 22 0.421960.37970 0.34185 0.30793 0.277510.25021 0.22571 23 0.40573 0.36335 0.32557 0.29187 0.26180 0.23494 0.21095 24 0.39012 0.34770 0.31007 0.27666 0.24698 0.22060 0.19715 25 0.37512 0.33273 0.29530 0.26223 0.23300 0.20714 0.18425 26 0.36069 0.31840 0.28124 0.24856 0.21981 0.19450 0.17220 27 0.34682 0.30469 0.26785 0.23560 0.20737 0.18263 0.16093 28 0.333480.29157 0.25509 0.22332 0.19563 0.17148 0.15040 29 0.32065 0.27902 0.24295 0.21168 0.18456 0.16101 0.14056 30 0.30832 0.26700 0.23138 0.20064 0.17411 0.15119 0.13137 31 0.29646 0.25550 0.22036 0.19018 0.16425 0.14196 0.12277 32 0.28506 0.24450 0.20987 0.18027 0.15496 0.13329 0.11474 33 0.27409 0.23397 0.19987 0.17087 0.14619 0.12516 0.10723 34 0.26355 0.22390 0.19035 0.16196 0.13791 0.11752 0.10022 35 0.25342 0.21425 0.18129 0.15352 0.13011 0.11035 0.09366 0.20829 0.17193 0.14205 0.11746 0.09722 0.08054 0.06678 45 0.17120 0.13796 0.11130 0.08988 0.07265 0.05879 0.04761 0.14071 0.11071 0.08720 0.06877 0.05429 0.04291 0.03395Explanation / Answer
Solution 11-2 a:
Solution 11-2b:
Amount of bond interest expense for the first year = $383,777 + $385,128 = $768,905
Solution 11-2c:
The company was able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000, becuase interest rate offered by the company on bond was lesser than market rate of interest resulting in bonds were issued at discount to match the market yield. If company issued bond at market rate of interest then for sure company was able issue bond at $10,000,000
Note: As mulitple questions are posted, i have answered first question with all parts as per chegg policy. Kindly post separate question for answer of remaining questions.
Journal Entries - Chin Company Event Particulars Debit Credit 1 Cash Dr $9,594,415.00 Discount on bond payable Dr $405,585.00 To Bond Payable $10,000,000.00 (To record issue of bond at discount) 2 Interest expense Dr ($9,594,415*4%) $383,777.00 To Cash $350,000.00 To Discount on bond payable $33,777.00 (To record first semiannual interest payment and discount amortized) 3 Interest expense Dr [($9,594,415 + $33,777)*4%] $385,128.00 To Cash $350,000.00 To Discount on bond payable $35,128.00 (To record 2nd semiannual interest payment and discount amortized)