Bonds Intel Inc. is the pioneer in the manufacture of microprocessors for comput
ID: 2484478 • Letter: B
Question
Bonds Intel Inc. is the pioneer in the manufacture of microprocessors for computers. The company’s fiscal year runs from April 1 to March 31. On 4/1/2015, Intel Issued $5,000,000 of 11% Bonds due in 10 years. The interest is payable annually on April 1. The market rate of interest on that date for bonds of similar risk is 10%. Prepare the journal entry for the issuance of the bonds and on the first interest payment date. Stocks Presented below is the stockholders’ equity section of AMR Corporation. All amounts are in millions except for number of shares and par value.
Stockholders' Equity (Deficit) Current Year Prior Year Preferred stock - 20,000,000 shares authorized; none issued $ -0- $ -0- Common stock - $1 par value; 750,000,000 shares authorized; 182,350,259 shares issued 182 182 Additional paid-in capital 2,521 2,605 Treasury shares at cost: current year-21,194,312; prior year-22,768,027 (1,308) (1,405) Accumulated other comprehensive loss (664) (785) Accumulated deficit (1,312) (551) $ (581) $ 46
Explain why the common stock is classified as part of the stockholders’ equity.
Explain why treasury stock is not classified as an asset.
Explain what is meant by "Accumulated other comprehensive loss."
Why is the accumulated deficit larger in the current year than in the prior year?
Compute book value per share for AMR for the current year.
Explanation / Answer
Explain why the common stock is classified as part of the stockholders’ equity.
Answer :
Let us define common stock. Common stock means an investor that has given a corporation money in return for part ownership of the corporation. A stock certificate (may be electronic) will be issued which is the evidence of its ownership interest.
Common stockholders are not guaranteed dividends or assets upon dissolution of the corporation. Therefore this is equity earned for the corporation as a result of investor payments to the corporation for interest in the company hence creating stockholder's equity.
2
Explain why treasury stock is not classified as an asset.
Answer :
Treasury stock means shares that have been reacquired and which are fully paid by the corporation that have not been retired.
As the corporation can not own it's own stock it is not considered as an asset.An entry is made to reduce assets and stockholder's equity.In other words treasury stock is the same as unissued capital stock
3
Explain what is meant by "Accumulated other comprehensive loss."
Accumulated other comprehensive loss is a concept which takes net loss a few steps further. It includes items that are not immediately recognized in net income such as foreign translation adjustments, investment valuation adjustments, and a bunch of other things that few people understand and even fewer give a rat's behind about.
Accumulated other comprehensive income or loss is just an aggregation of those items over the years.
4
Compute book value per share for AMR for the current year.
Answer : book value per share for AMR for the current year= $ 3.1862
Working notes for the above answer is as under
We have been provided with the information as follow
Book value of the share is calculated as follow
=common stockholder equity / no of outstanding shares
=581,000,000 / 182,350,359
= $ 3.1862
Current Year Prior Year Preferred stock200,000 authorized; none issued 0 0 Common stock - $1 par value; 750,000,000 sharesauthorized,182,350,259 shares issued 182 182 Additional paid-in capital 2521 2605 Treasury shares at cost
21,194,312; prior year-22,768,027 (1,308) (1,405) -1308 -1405 Accumulated other comprehensive loss -1312 -551 Accumulated deficit -581 -6