Raptor Inc. has Retained earnings of $500,000 and Total stockholders’ equity of $2,000,000

Raptor Inc. has Retained earnings of $500,000 and Total stockholders’ equity of $2,000,000. It has 100,000 shares of $8 par value common stock outstanding, which is currently selling for $30 per share. If Raptor declares a 10% stock dividend on its common stock

Retained earnings will decrease by $300,000 and Total stockholders’ equity will increase by $300,000.

Retained earnings will decrease by $80,000 and Total stockholders’ equity will increase by $80,000.

Retained earnings will decrease by $300,000 and Total paid-in capital will increase by $300,000.

Net income will decrease by $80,000.

This is a true statement. Retained earnings will decrease by $300,000 and Total paid-in capital will increase by $300,000.

In the stockholders’ equity section, Common Stock Dividends Distributable is reported as a(n)

deduction from Retained earnings.

addition to Capital stock.

deduction from Total paid-in capital and Retained earnings.

addition to Additional paid-in capital.

Common Stock Dividends Distributable is reported as an addition to Capital stock.

Reffue Company issued $400,000 of 9%, 10-year bonds on January 1, 2012, at face value

Reffue Company issued $400,000 of 9%, 10-year bonds on January 1, 2012, at face value. Interest is payable semiannually on July 1 and January 1.

Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a) The issuance of the bonds.
(b) The payment of interest on July 1, assuming no previous accrual of interest.
(c) The accrual of interest on December 31.
(d) The redemption of bonds at maturity, assuming interest for the last interest period has been paid and recorded.  

(a)January 1, 2012
Cash Debit 400,000
Bonds Payable Credit 400,000

(b) July 1, 2012
Interest Expense Debit 18,000
Cash Credit 18,000

(c) December 31, 2012
Interest Expense Debit 18,000
Interest Payable Credit 18,000

(d)January 1, 2022
Bonds Payable Debit 400,000
Cash credit 400,000

Pas Company issued $1,000,000 of bonds on January 1, 2012.

Pas Company issued $1,000,000 of bonds on January 1, 2012.

(a) Prepare the journal entry to record the issuance of the bonds if they are issued at (1) 100, (2) 98, and (3) 103.
(b) Prepare the journal entry to record the retirement of the bonds at maturity, assuming the bonds were issued at 100.
(c) Prepare the journal entry to record the retirement of the bonds before maturity at 98. Assume the balance in Premium on Bonds Payable is $9,000.
(d) Prepare the journal entry to record the conversion of the bonds into 30,000 shares of $10 par value common stock. Assume the bonds were issued at par.

a) (1) Cash Debit 1,000,000
Bonds Payable Credit 1,000,000

(2)Cash Debit 980,000
Discount on Bonds Payable Debit 20,000
Bonds Payable Credit 1,000,000

(3)Cash Debit 1,030,000
Bonds Payable Credit 1,000,000
Premium on Bonds Payable Credit 30,000

(b) Bonds Payable Debit 1,000,000
Cash Credit 1,000,000

(c)Bonds Payable Debit 1,000,000
Premium on Bonds Payable Debit 9,000
Cash Credit 980,000
Gain on Bond Redemption Credit 29,000

(d)Bonds Payable Debit 1,000,000
Paid-in Capital in Excess of Par-Common Stock Credit 700,000
Common Stock Credit 300,000

Caruba Company issued $400,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable semiannually

Caruba Company issued $400,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable semiannually on July 1 and January 1. Caruba uses straight-line amortization for bond premium or discount.

Prepare the journal entries to record the following.

(a) The issuance of the bonds.
(b) The payment of interest and the premium amortization on July 1, 2012, assuming that interest was not accrued on June 30.
(c) The accrual of interest and the premium amortization on December 31, 2012.
(d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

(a)
Jan. 1, 2012

Cash Debit ($400,000 x 103%)412,000
Bonds Payable Credit 400,000
Premium on Bonds Payable Credit 12,000

(b)
July 1, 2012

Interest Expense Debit 17,700
Premium on Bonds Payable Debit ($12,000 x 1/40)300
Cash Credit ($400,000 x 9% x 1/2)18,000

(c)
Dec. 31, 2012
Interest Expense Debit 17,700
Premium on Bonds Payable Debit 300
Interest Payable Credit 18,000

(d)
Jan. 1, 2032
Bonds Payable Debit 400,000
Cash Credit 400,000

Sunny Isles Car Rental leased a car to Emmaus Company for one year. Terms of the operating lease agreement call for monthly payments of $500.

Presented below are two independent situations.

1. Sunny Isles Car Rental leased a car to Emmaus Company for one year. Terms of the operating lease agreement call for monthly payments of $500.
2. On January 1, 2012, Wruck Inc. entered into an agreement to lease 20 computers from Braskich Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2012. The present value of the three rental payments is $74,606. Wruck considers this a capital lease.

(a) Prepare the appropriate journal entry to be made by Emmaus Company for the first lease payment.
(b) Prepare the journal entry to record the lease agreement on the books of Wruck Inc. on January 1, 2012.

(a) Car Rental Expense Debit 500
Cash Credit 500

(b)Leased Asset-Equipment Debit 74,606
Lease Liability Credit 74,606

On May 1, 2012, Chance Corp. issued $600,000, 9%, 5-year bonds at face value

On May 1, 2012, Chance Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2012, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31.

(a) Prepare the journal entry to record the issuance of the bonds.
(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2012.
(c) Show the balance sheet presentation on December 31, 2012.
(d) Prepare the journal entry to record payment of interest on May 1, 2013, assuming no accrual of interest from January 1, 2013, to May 1, 2013.
(e) Prepare the journal entry to record payment of interest on November 1, 2013.
(f) Assume that on November 1, 2013, Chance calls the bonds at 102. Record the redemption of the bonds.

(a) Prepare the journal entry to record the issuance of the bonds.

Cash Debit 600,000
Bonds Payable Credit 600,000

(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2012.

Interest Expense Debit 9,000
Interest Payable Credit ($600,000 x 9% x 2/12)9,000

(c) Show the balance sheet presentation on December 31, 2012.

Current liabilities

Interest Payable 9,000

Long term Liabilities

Bonds Payable 600,000

(d) Prepare the journal entry to record payment of interest on May 1, 2013, assuming no accrual of interest from January 1, 2013, to May 1, 2013.

Interest Expense Debit ($600,000 x 9% x 4/12) 18,000
Interest Payable Debit 9,000
Cash Credit 27,000

(e) Prepare the journal entry to record payment of interest on November 1, 2013.

Interest Expense Debit 27,000
Cash Credit($600,000 x 9% x 1/12) 27,000

(f) Assume that on November 1, 2013, Chance calls the bonds at 102. Record the redemption of the bonds.

Bonds Payable Debit 600,000
Loss on Bond Redemption Debit 12,000
Cash credit ($600,000 x 1.02) 612000

On January 1, 2013, Boston Enterprises issues bonds that have a $3,400,000 par value

On January 1, 2013, Boston Enterprises issues bonds that have a $3,400,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par.

1. How much interest will Boston pay (in cash) to the bondholders every six months?
2. Prepare journal entries for the following.

(a) The issuance of bonds on January 1, 2013.
(b) The first interest payment on June 30, 2013.
(c) The second interest payment on December 31, 2013.
3. Prepare the journal entry for issuance of bonds assuming.

(a) The bonds are issued at 98.
(b) The bonds are issued at 102.

1. How much interest will Boston pay (in cash) to the bondholders every six months?
$3,400,000 x 4.5% = $153,000
Semiannual cash interest payment = $3,400,000 × 9% × 1/2 = $153,000
2. Prepare journal entries for the following.
(a) The issuance of bonds on January 1, 2013.
Cash Debit 3,400,000
Bond payable Credit 3,400,000
(b) The first interest payment on June 30, 2013.
Bond interest expense Debit 153,000
Cash Credit $153,000

(c) The second interest payment on December 31, 2013.
Bond interest expense debit 153,000
Cash credit 153,000
3. Prepare the journal entry for issuance of bonds assuming.
(a) The bonds are issued at 98.
Cash Debit $3,332,000 ($3,400,000 × 0.98)
Discount on bonds payable Debit 68,000
Bonds payable Credit 3,400,000

(b) The bonds are issued at 102.
Cash Debit 3,468,000 ($3,400,000 × 1.02)
Premium on bonds payable Credit 68,000
Bonds payable Credit 3,400,000

Production costs chargeable to the Finishing Department in June in Cascio Company are materials

Production costs chargeable to the Finishing Department in June in Cascio Company are materials $16,144, labor $43,120, overhead $18,500. Equivalent units of production are materials 20,180 and conversion costs 20,540. Production records indicate that 18,470 units were transferred out, and 2,100 units in ending work in process were 50% complete as to conversion cost and 100% complete as to materials.

Prepare a cost reconciliation schedule.

Transferred out = (18,470 x $3.80) = $70,186
Materials = (2,100 x $0.80) = $1,680
Conversion costs = (1,050* x $3.00) = $3,150

*2,100 x 50% = 1,050

Tano issues bonds with a par value of $180,000 on January 1, 2013. The bonds’ annual contract rate is 8%

Tano issues bonds with a par value of $180,000 on January 1, 2013. The bonds’ annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $170,862.

1. What is the amount of the discount on these bonds at issuance?

2. How much total bond interest expense will be recognized over the life of these bonds?

3. Use the straight-line method to amortize the discount for these bonds.

1. What is the amount of the discount on these bonds at issuance?

Discount = Par value – Issue price = $180,000 – $170,862 = $9,138

2. How much total bond interest expense will be recognized over the life of these bonds?

Total bond interest expense over the life of the bonds
Amount repaid
Six payments of $7,200* $ 43,200
Par value at maturity 180,000

Total repaid 223,200
Less amount borrowed (170,862 )

Total bond interest expense $ 52,338

*180,000 × 0.08 × ½ = $7,200

Semiannual Period-EndUnamortized DiscountCarrying Value01/01/2013         $9,138         $170,862

06/30/2013         $7,615                     $172,385

12/31/2013          $6,092                     $173,908

06/30/2014         $4,569                     $175,431

12/31/2014          $3,046                    $176,954

06/30/2015          $1,523                    $178,477

12/31/2015          $0                           $180,000

Perry, Inc., has a total debt ratio of 0.36. What is its debt–equity ratio

Perry, Inc., has a total debt ratio of 0.36. What is its debt–equity ratio? (Round your answer to 2 decimal places. (e.g., 32.16))

Debt–equity ratio

What is its equity multiplier? (Round your answer to 2 decimal places. (e.g., 32.16))

Equity multiplier

Total debt ratio = 0.36 = TD / TA

Substituting total debt plus total equity for total assets, we get:

0.36 = TD / (TD + TE)

Solving this equation yields:

0.36(TE) = 0.64(TD)

Debt/equity ratio = TD / TE = 0.36 / 0.64 = 0.56

Equity multiplier = 1 + D/E = 1.56

Kindle Fire Prevention Corp. has a profit margin of 4.8 percent, total asset turnover of 2.0

Kindle Fire Prevention Corp. has a profit margin of 4.8 percent, total asset turnover of 2.0, and ROE of 19.34 percent. What is this firm’s debt–equity ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Debt–equity ratio

ROE = (PM)(TAT)(EM)
ROE = 0.1934 = (0.048)(2.00)(EM)

EM = 0.1934 / (0.048)(2.00) = 2.01

D/E = EM – 1 = 2.01 – 1 = 1.01

Perry, Inc., has a total debt ratio of 0.36. What is its debt–equity ratio? (Round your answer to 2 decimal places. (e.g., 32.16))

Debt–equity ratio

What is its equity multiplier? (Round your answer to 2 decimal places. (e.g., 32.16))

Equity multiplier

Y3K, Inc., has sales of $6,339, total assets of $2,955, and a debt–equity ratio of 1.50

Y3K, Inc., has sales of $6,339, total assets of $2,955, and a debt–equity ratio of 1.50. If its return on equity is 12 percent, what is its net income?

This is a multistep problem involving several ratios. The ratios given are all part of the DuPont Identity. The only DuPont Identity ratio not given is the profit margin. If we know the profit margin, we can find the net income since sales are given. So, we begin with the DuPont Identity:

ROE = 0.12 = (PM)(TAT)(EM) = (PM)(S / TA)(1 + D/E)

Solving the DuPont Identity for profit margin, we get:

PM = [(ROE)(TA)] / [(1 + D/E)(S)]
PM = [(0.12)($2,955)] / [(1 + 1.50)( $6,339)] = 0.0224

Now that we have the profit margin, we can use this number and the given sales figure to solve for net income:

PM = 0.0224 = NI / S
NI = 0.0224($6,339) = $141.84

Imprudential, Inc. has an unfunded pension liability of $585 million that must be paid in 20 years

Imprudential, Inc. has an unfunded pension liability of $585 million that must be paid in 20 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present.

If the relevant discount rate is 7.8 percent, what is the present value of this liability?

To find the PV of a lump sum, we use:

PV = FV / (1 + r)^t
PV = $585,000,000 / (1.078)^20 = $130,250,874.87

Wainright Co. has identified an investment project with the following cash flows.

Wainright Co. has identified an investment project with the following cash flows.

Year Cash Flow
1 $ 830
2 1,150
3 1,410
4 1,550

If the discount rate is 8 percent, what is the present value of these cash flows?

What is the present value at 16 percent?

What is the present value at 25 percent?

To find the PV of a lump sum, we use:

PV = FV / (1 + r)^t

PV@8% = $830 / 1.08 + $1,150 / 1.08^2 + $1,410 / 1.08^3 + $1,550 / 1.08^4 = $4,013.06
PV@16% = $830 / 1.16 + $1,150 / 1.16^2 + $1,410 / 1.16^3 + $1,550 / 1.16^4 = $3,329.53
PV@25% = $830 / 1.25 + $1,150 / 1.25^2 + $1,410 / 1.25^3 + $1,550 / 1.25^4 = $2,756.80

Note ^ is used for power .

Toadies, Inc., has identified an investment project with the following cash flows.

Toadies, Inc., has identified an investment project with the following cash flows.

Year Cash Flow
1 $ 1,275
2 1,395
3 1,480
4 1,530

If the discount rate is 7 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value $

If the discount rate is 12 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value $

If the discount rate is 23 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value $

To find the FV of a lump sum, we use:

FV = PV(1 + r)^t

FV@7% = $1,275(1.07)^3 + $1,395(1.07)^2 + $1,480(1.07) + $1,530 = $6,272.67
FV@12% = $1,275(1.12)^3 + $1,395(1.12)^2 + $1,480(1.12) + $1,530 = $6,728.77
FV@23% = $1,275(1.23)^3 + $1,395(1.23)^2 + $1,480(1.23) + $1,530 = $7,833.50

Notice we are finding the value at Year 4, the cash flow at Year 4 is simply added to the FV of the other cash flows. In other words, we do not need to compound this cash flow.

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $22,000 per year forever. If the required return on this investment is 5.80 percent, how much will you pay for the policy?

This cash flow is a perpetuity. To find the PV of a perpetuity, we use the equation:

PV = C / r
PV = $22,000 / 0.0580 = $379,310.34

Dinero Bank offers you a $68,000, four-year term loan an annual interest rate of 7 percent. What will your annual loan payment be?

Here we have the PVA, the length of the annuity, and the interest rate. We want to calculate the annuity payment. Using the PVA equation:

PVA = C({1 − [1/(1 + r)^t ] } / r)
$68,000 = C{[1 − (1/1.0700^4 ) ] / 0.0700}

We can now solve this equation for the annuity payment. Doing so, we get:

C = $68,000 / 3.38721 = $20,075.51

The Ashwood Company has a long-term debt ratio of 0.30 and a current ratio of 1.40. Current liabilities are $990,

The Ashwood Company has a long-term debt ratio of 0.30 and a current ratio of 1.40. Current liabilities are $990, sales are $5,140, profit margin is 9.50 percent, and ROE is 17.70 percent. What is the amount of the firm’s net fixed assets?

$3,545.08
$3,448.45
$4,931.08
$2,172.32
$1,182.32

The solution to this problem requires a number of steps. First, remember that CA + NFA = TA. So, if we find the CA and the TA, we can solve for NFA. Using the numbers given for the current ratio and the current liabilities, we solve for CA:

CR = CA / CL
CA = CR(CL) = 1.40($990) = $1,386

To find the total assets, we must first find the total debt and equity from the information given. So, we find the sales using the profit margin:

PM = NI / Sales
NI = PM(Sales) = 0.095($5,140) = $488.30

We now use the net income figure as an input into ROE to find the total equity:
ROE = NI / TE
TE = NI / ROE = $488.30 / 0.177 = $2,758.76

Next, we need to find the long-term debt. The long-term debt ratio is:
Long-term debt ratio = 0.30 = LTD / (LTD + TE)

Inverting both sides gives:
1 / 0.30 = (LTD + TE) / LTD = 1 + (TE / LTD)

Substituting the total equity into the equation and solving for long-term debt gives the following:
3.3333 = 1 + ($2,758.76 / LTD)
LTD = $2,758.76 / 2.3333 = $1,182.32

Now, we can find the total debt of the company:
TD = CL + LTD = $990 + 1,182.32 = $2,172.32

And, with the total debt, we can find the TD&E, which is equal to TA:
TA = TD + TE = $2,172.32 + 2,758.76 = $4,931.08

And finally, we are ready to solve the balance sheet identity as:
NFA = TA – CA = $4,931.08 – 1,386.00 = $3,545.08

Holliman Corp. has current liabilities of $426,000, a quick ratio of 1.40, inventory turnover of 3.90

Holliman Corp. has current liabilities of $426,000, a quick ratio of 1.40, inventory turnover of 3.90, and a current ratio of 3.10. What is the cost of goods sold for the company?

$1,013,880
$905,250
$2,824,380
$596,400
$5,150,340

The only ratio given which includes cost of goods sold is the inventory turnover ratio, so it is the last ratio used. Since current liabilities is given, we start with the current ratio:

Current ratio = 3.10 = CA / CL = CA / $426,000
CA = $1,320,600

Using the quick ratio, we solve for inventory:

Quick ratio = 1.40 = (CA – Inventory) / CL = ($1,320,600 – Inventory) / $426,000
Inventory = CA – (Quick ratio × CL)
Inventory = $1,320,600 – (1.40 × $426,000)
Inventory = $724,200
Inventory turnover = 3.90 = COGS / Inventory = COGS / $724,200
COGS = $2,824,380

A company has the right to buy back securities on the anniversary date of purchase at a specified price when the securities were issued. What impact does this feature have to the desirability of this security as an investment?

This will make the security less desirable as the company will purchase the security prior to its maturity if the interest rate decrease. This will make feasible for the company to buy back this security and this feature is normally considered as call feature.

Would you be willing to pay $50,000 today in exchange for $150,000 in 35 years

Would you be willing to pay $50,000 today in exchange for $150,000 in 35 years? What considerations would you take into account before making your decision? Also, would your answer depend on who is making you the promise to repay?

For this, we have to calcualte the present value of the cash to be paid in 35 years and in the absence of interest rate, it is not possible to calcualte the present value. I assume 10% is the interest rate and the present value is as under:

FV = $150,000

r = 10%

Nper = 35 years

PV is calcualted to be $5337.62

So, yes I will like to exchange $150,000 in 35 years. Also, as the commitment to repay the loan is dependent on the solvency of the promising party, it is important to consider the promising party and their long term solvency.

You have graduated and you have interviewed at several companies. One company presents you with an offer of

You have graduated and you have interviewed at several companies. One company presents you with an offer of employment but two different contracts. Offer A is a 5 year contract for $200,000 in 5 equal yearly installments. Offer B is a 5 year contract for the same amount paid in installments that will increase by 5% per year. Which contract is the better deal?

Offer B is a better deal as it will result in more present value at year zero as compared to the offer A due to annual increase of 5% per year feature in this offer.


A company makes the decision to lengthen their payables period to pay vendors/suppliers. How will this affect the statement of cash flow?

This will increase the cash inflows as less cash was paid to accounts payable due to lengthening the accounts payables

What happens to the FV (future value) of an annuity if the interest rate increases (R)? What will happen to the PV (present value)?

With the increase in the interest rate, the future value will also increase as this will result in more interest to be compounded. While, the increase in the interest rate will decrease the present value.

Assume the total cost of a college education will be $250,000 when your child enters college in 17 years

Assume the total cost of a college education will be $250,000 when your child enters college in 17 years. You presently have $72,000 to invest.

What annual rate of interest must you earn on your investment to cover the cost of your child’s college education?

We can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)^t
Solving for r, we get:

r = (FV / PV)^(1 / t) – 1
r = ($250,000 / $72,000)^1/17 – 1 = 0.0760, or 7.60%

The situation in which a firm is unable to meet its financial obligations is called

A. technical insolvency. 

B. liquidation. 

C. reorganization.

D. accounting insolvency

Insolvency mean that the assets of the company will not able to meet the liabilities obligation’s . So in the option provided accounting insolvency is best answer for it.