Smart Corporation owes a trade creditor $ 30,000 on open account which the corporation does not have sufficient cash to pay. The trade creditor suggests that Smart Corporation issue to him 750 shares of the $ 24 par value common stock, which is currently selling on the market at $ 40. Present the entry or entries that should be made on Smart Corporation’s books.
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- Prepare general journal entries for the following transactions, identifying each transaction by letter: (a) Gnu Company issued 5,000 shares of 1 par common stock to the Prendergas law firm as partial payment of fees incurred to incorporate the business. Gnu was short of cash, so Prendergas agreed to accept 10,000 cash and the shares of common stock in full settlement of its bill for 55,000. (b) Gnu issued 50,000 shares of 1 par common stock in exchange for a parcel of land for building a shopping plaza. (The list price for the land was 400,000; a similar parcel in the same area sold last week for 380,000. During the past month, the price at which Gnus common stock has traded on the open market has ranged from 5 to 12 per share. Two trades occurred yesterday at 7 and 10 per share.) (c) Gnu purchased 10,000 shares of 1 par value common treasury stock for 70,000. (This is the only treasury stock that Gnu holds.) (d) Gnu sold 4,000 shares of common treasury stock for 32,000. (e) Gnu sold 5,000 shares of common treasury stock for 30,000.Ayayai Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Ayayai and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,970 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,970 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Ayayai’s cash flow problems are due primarily to the company’s desire to finance a $300,080 plant expansion over the next 2 fiscal years through internally generated funds.The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years. Ayayai CorporationBalance SheetMarch 31 Assets 2021 2020 Cash $18,120 $12,410…Hardstone Inc. had excess cash and invested it in the stock of Softrock, Inc. On August 5, 2021 Hardstone bought 7,000 shares of Softrock at $12 per share. On September 30, 2021, Softrock paid a cash dividend of $1 per share. On December 31, 2021, the stock had decreased in value to $10 per share. Which of the following would be included in the journal entry for December 31, 2021? No entry required Debit to Trading Securities: $14,000 Debit to Unrealized Loss on Investments: $14,000 Credit to Cash: $7,000 Credit to Dividend Revenue: $7,000
- To obtain all of the stock of Molly, Inc., Harrison Corporation issued its own common stock. Harrison had to pay $98,000 to lawyers, accountants, and a stock brokerage firm in connection with services rendered during the creation of this business combination. In addition, Harrison paid $56,000 in costs associated with the stock issuance. How will these two costs be recorded?Darlington Inc., permits any of its employees to buy shares directly from the company. There are no brokerage fees and shares can be purchased at a 10% discount. During May, employees purchased 14,000 shares at a time when the market price of the shares was $10 per share.Prepare the appropriate journal entry for the May purchase. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)Sage Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Sage and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,710 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,960 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Sage’s cash flow problems are due primarily to the company’s desire to finance a $297,780 plant expansion over the next 2 fiscal years through internally generated funds.The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years. Sage CorporationBalance SheetMarch 31 Assets 2021 2020 Cash $18,150 $12,590…
- In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the problem, Land and the bank agreed to amend the note as follows: • Extended the maturity to December 31, 2X23. • The P480,000 interest due on December 31, 2X21 was forgiven. • Land Corporation would be required to make an annual interest payment of P540,000 every December 31 starting 2X22. • Transaction cost incurred that is directly related to the debt restructuring was P16,850. As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of transaction cost is 6.24%. 5. What type of debt restructuring is being described by the case? 6. What is the total gain from restructuring? 7. What amount should Land Corporation report…In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the problem, Land and the bank agreed to amend the note as follows: • Extended the maturity to December 31, 2X23. • The P480,000 interest due on December 31, 2X21 was forgiven. • Land Corporation would be required to make an annual interest payment of P540,000 every December 31 starting 2X22. • Transaction cost incurred that is directly related to the debt restructuring was P16,850. As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of transaction cost is 6.24%. 8. What is the carrying amount of the obligation that should be reported in 2X22 statement of financial position? 9. Provide the journal entry for debt…In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the problem, Land and the bank agreed to amend the note as follows: • Extended the maturity to December 31, 2X23. • The P480,000 interest due on December 31, 2X21 was forgiven. • Land Corporation would be required to make an annual interest payment of P540,000 every December 31 starting 2X22. • Transaction cost incurred that is directly related to the debt restructuring was P16,850. As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of transaction cost is 6.24%. 5. What type of debt restructuring is being described by the case? 6. What is the total gain from restructuring? 7. What amount should Land Corporation report…
- ABC Company is in financial difficulties and agreed to issue 20,000 of its P20 par value shares in settlement of its loan from a bank of P1,000,000. On this date, the accrued interest not yet paid by ABC Company amounted to P120,000. The fair market value of the shares on this date is P40 per share while the fair market value of the liability is P1,200,000. According to our standards, what amount of gain or loss from extinguishment of debt shall be recognized from this equity swap?In September, the company entered the following transactions: Sept. 1 Issued common shares to Tony Ferria and other investors in exchange for $100,000 cash. Sept 1 Paid $9,000 to Wellington Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent-It Sept 1 Purchased for $180,000 all the equipment formerly owned by Rent-It. Paid $70,000 cash and issued a one-year note payable for $110,000, plus interest at the annual rate of 9%. This rental equipment is estimated to have a 10-year useful life. Sept 4 Purchased office supplies on account from Modern Office Co., $1,630. Payment due in 30 days. (These supplies are expected to last for several months.) Sept 8 Received $10,000 cash from McFadden Construction Co. as advance payment for equipment rental. Sept 12 Paid salaries for the first two weeks in September, $3,600. Sept 15 Excluding the McFadden…Shamrock Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Shamrock and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,920 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $6,040 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Shamrock’s cash flow problems are due primarily to the company’s desire to finance a $298,670 plant expansion over the next 2 fiscal years through internally generated funds.The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years. Shamrock CorporationBalance SheetMarch 31 Assets 2021 2020 Cash $18,060…
