Bond and Bonds Payable

Only available on StudyMode
  • Download(s) : 83
  • Published : February 15, 2012
Open Document
Text Preview
1)pk acquired a 25% interest in Trent Co. on January 1, 2010, for $500,000. At that time, Trent had 1,000,000 shares of its $1 par common stock issued and outstanding. During 2010, Trent paid cash dividends of $160,000 and thereafter declared and issued a 5% common stock dividend when the market value was $2 per share. Trent's net income for 2010 was $360,000. What is the balance in Agee’s investment account at the end of 2010

Cost$500,000
Share of net income (.25 × $360,000)90,000
Share of dividends (.25 × $160,000) (40,000)
Balance in investment account $550,000

2)During 2008, PK Co. purchased 2,000, $1,000, 9% bonds. The carrying value of the bonds at December 31, 2010 was $1,960,000. The bonds mature on March 1, 2015, and pay interest on March 1 and September 1. PK sells 1,000 bonds on September 1, 2012, for $988,000, after the interest has been received. PK uses straight-line amortization. The gain on the sale is

Discount amortization: $40,000 × 8/50 = $6,400
($1,960,000 + $6,400) ÷ 2 = $983,200; $988,000 – $983,200 = $4,800 gain.

1. On August 1, 2011, Lane Corporation called its 10% convertible bonds for conversion. The $8,000,000 par bonds were converted into 320,000 shares of $20 par common stock. On August 1, there was $700,000 of unamortized premium applicable to the bonds. The fair market value of the common stock was $20 per share. Ignore all interest payments.

1.Bonds Payable8,000,000
Premium on Bonds Payable700,000
Common Stock6,400,000
Paid-in Capital in Excess of Par2,300,000

2. Packard, Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par $3,000,000, at 97. The investment banker indicates that if the bonds had not been convertible they would have sold at 94.

Cash2,910,000
Discount on Bonds Payable90,000
Bonds Payable3,000,000

3. Gomez Company issues $5,000,000 of bonds with a coupon rate of 8%. To help the...
tracking img