Accounting 202
Final Exam Review
Questions from old Midterm
Question 4
On December 31, 2012, Milton Company had $600,000 of short-term debt in the form of notes payable due February 2, 2013. On January 21, 2013, the company issued 12,500 shares of its common stock for $36 per share, receiving $450,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2013, the proceeds from the stock sale, supplemented by additional $150,000 cash, are used to liquidate the $600,000 debt. The December 31, 2012, balance sheet is issued on February 23, 2013.
Ignoring the foot note disclosure how should the $600,000 of debt be presented on the December 31st 2012 balance sheet?
Current liabilities: Notes payable ........................................................ $150,000
Long-term debt: Notes payable refinanced in February 2013 ...... 450,000
Question 12
On June 30, 2004, Marmet Company issued 12% bonds with a par value of $300,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2012. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2013, and to issue new bonds. New 10% bonds were sold in the amount of $800,000 at 102; they mature in 20 years. Marmet Company uses straight-line amortization. Interest payment dates are December 31 and June 30. What is the loss on the early extinguishment of debt?
300,000 * 2% = $6,000
$6,000 / 20 years = $300 A YEAR OF AMORTIZATION
Original carrying value= $300,000* .98= $294,000
9 yrs * $300= $2,700 + $294,000 = $296,700 = Carrying Value at the call date
Call Price
$300,000 * 104%= $312,000
$312,000- $296,700 = $15,300
We have a loss of $15,300
A)$15,300
Question 17
Splendler, Inc. transferred to stockholders some of its equity investments costing $1,000,000 by declaring a property dividend on December 28, 2011, to be distributed on January 30, 2012, to stockholders
Questions from old Midterm
Question 4
On December 31, 2012, Milton Company had $600,000 of short-term debt in the form of notes payable due February 2, 2013. On January 21, 2013, the company issued 12,500 shares of its common stock for $36 per share, receiving $450,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2013, the proceeds from the stock sale, supplemented by additional $150,000 cash, are used to liquidate the $600,000 debt. The December 31, 2012, balance sheet is issued on February 23, 2013.
Ignoring the foot note disclosure how should the $600,000 of debt be presented on the December 31st 2012 balance sheet?
Current liabilities: Notes payable ........................................................ $150,000
Long-term debt: Notes payable refinanced in February 2013 ...... 450,000
Question 12
On June 30, 2004, Marmet Company issued 12% bonds with a par value of $300,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2012. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2013, and to issue new bonds. New 10% bonds were sold in the amount of $800,000 at 102; they mature in 20 years. Marmet Company uses straight-line amortization. Interest payment dates are December 31 and June 30. What is the loss on the early extinguishment of debt?
300,000 * 2% = $6,000
$6,000 / 20 years = $300 A YEAR OF AMORTIZATION
Original carrying value= $300,000* .98= $294,000
9 yrs * $300= $2,700 + $294,000 = $296,700 = Carrying Value at the call date
Call Price
$300,000 * 104%= $312,000
$312,000- $296,700 = $15,300
We have a loss of $15,300
A)$15,300
Question 17
Splendler, Inc. transferred to stockholders some of its equity investments costing $1,000,000 by declaring a property dividend on December 28, 2011, to be distributed on January 30, 2012, to stockholders