Chap009

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Chapter 9 Long-Term Liabilities Compare financing alternatives (LO1) E9–1 Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $80 million gaming center: a. Issue $80 million of 5% bonds at face amount. b. Issue 2 million additional shares of common stock for $40 per share. Issue Bonds Issue Stock Operating income $12,000,000 $12,000,000 Interest expense (bonds only) Income before tax Income tax expense (35%) Net income $___________ $___________ Number of shares 2,000,000 4,000,000 Earnings per share (Net income/# of shares) $ $ Required: 1.…show more content…
2. Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012. Record bonds issued at a premium (LO4) E9–7 On January 1, 2012, Splash City issues $500,000 of 7% bonds, due in 10 years, with interest payable semi-annually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 6%, the bonds will issue at $537,194. 1. Complete the first three rows of an amortization table. 2. Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012. Record bonds issued at face amount (LO4) E9–8 On January 1, 2012, White Water issues $200,000 of 7% bonds, due in 10 years, with interest payable semi-annually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 7%, the bonds will issue at $200,000. Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012. Record bonds issued at a discount (LO4) E9–9 On January 1, 2012, White Water issues $200,000 of 7% bonds, due in 10 years, with interest payable semi-annually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 8%, the bonds will issue at $186,410. 1. Complete the first three rows of an amortization table. 2. Record the bond issue on January 1,

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