Question

4.

On January 1, $980,000, five-year, 10% bonds, were issued for $950,600. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize the discount on bonds payable, the semiannual amortization amount is

a.$5,880

b.$2,940

c.$29,400

d.$49,000

3.

If Eddie Industries issues $1,500,000 of 8% bonds at 105, the amount of cash received from the sale is

a.$1,080,000

b.$1,425,000

c.$1,575,000

d.$1,000,000

2.

Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends:

Year 1	$10,000
Year 2	45,000
Year 3	90,000

Determine the dividends per share for preferred and common stock for the third year.

a.$3.25 and $0.25

b.$2.00 and $0.25

c.$4.50 and $0.25

d.$4.50 and $0.90

1.

A company with 87,000 authorized shares of $5 par common stock issued 43,000 shares at $14. Subsequently, the company declared a 2% stock dividend on a date when the market price was $34 per share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

a.$4,300

b.$59,160

c.$29,240

d.$24,940

Answer 1

4) Discount on bonds payable = 980000-950600 = 29400

Semiannually amortization = 29400/10 = 2940

so answer is b) $2940

3) Cash received on issue of bonds = 1500000*105/100 = 1575000

So answer is c) $1575000

2) Dividend distribution :

Annual dividend = 20000*100*2% = 40000

	Preferred	Common	Total
Year 1	10000	0	10000
Year 2	45000	0	45000
Year 3	65000/20000 = 3.25	25000/100000 = 0.25	90000

So answer is a) $3.25 and $0.25

1) Amount transferred from retained earning to paid in capital account = 43000*2%*(34-5) = 24940

So answer is d) $24940