Your Questions About Stocks And Bonds 2012

0
0
0
0
0
0
0
0
0
or copy the link

Thomas asks…

Will a Euro revolt against austerity politics determine who wins the US White House in 2012?

How much will the revolt of French & Greek voters against the politics of European austerity spark a liberal / populist revolt against austerity politics in the US?

How much will the anti-austerity revolt in the Eurozone destabilize the US stock markets and hurt US exports — possibly undermining Obama’s efforts to push US economic recovery?

How much could economic instability in the Eurozone inspire investors around the world to buy more US savings bonds for safety’s sake — thus improving the chances of the Obama administration?

financi4 answers:

Since Kennedy beat Nixon, only the media determines who wins the US White House

Ken asks…

Bond entries from issuer side?

On April 1, 2003, Rowe Tool Company authorized the sale of $5,000,000 of 6% convertible bonds with interest payment dates of April 1 and October 1. The bonds were sold on July 1, 2003, and mature on April 1, 2023. The bond discount totaled $398,200. The bond contract entitles the bondholders to receive 20 shares of $1 par value common stock in exchange for each $1,000 bond. On April 1, 2013, the holders of bonds with total face value of $700,000 exercised their conversion feature. On July 1, 2013, Rowe Tool Company reacquired bonds, face value $600,000, on the open market. The balances in the equity accounts as of December 31, 2012, were:

Common stock $1 par value, authorized 3million shares, issued and outstanding, 300,000 shares, $300,000
Paid in capital in excess of par 6,400,000
Market value of the common stock and bond were as follows:

Date Bonds (per $1,000) Common Stock (Per share)
April 1 2013 $1,120 $52
July 1 2013 1,200 61

Prepare journal entries on the issuer’s books for each of the following transactions. (Use the straight-line amortization method for the bond discount.)
1.Sale of the bonds on July 1, 2003.
2.Interest payment on October 1, 2003.
3.Interest accrual on December 31, 2003, including bond discount amortization for the six months since the bond issuance.
4.Conversion of bonds on April 1, 2013. (Assume that interest and discount amortization are correctly shown as of April 1, 2013. No gain or loss on conversion is recognized.)
5.Reacquisition and retirement of bonds on July 1, 2013. (Assume that interest and discount amortization are correctly reported as of July 1, 2013.)

I have tried:
1. 2003, July 1
dr. Cash 4,676,800
dr.Discount on Bonds Payable 398,200
cr. Bonds payable 5,000,000
Cr. Interest payable

from 3), I don’t know how to do it…The journal entries have no problem, but still the calculation is a problem…Hope I can get help. thank you!

financi4 answers:

These are tough ones, and I can only try my best.

1. Sale of the bonds on July 1, 2003
Dr Cash $4,676,800
Dr Discount on bonds payable $398,200
Cr Bonds payable $5,000,000 (always at face value)
Cr Interest payable $75,000 ($5,000,000 x 6% x 3/12)

2. Interest payment on October 1, 2003
Dr Interest expense $75,000 (3 mths, July to Sept)
Dr Interest payable $75,000 (3 mths, accrued above)
Cr Cash $150,000 ($5,000,000 x 6% x 6/12)

3.Interest accrual on December 31, 2003, including bond discount amortization for the six months since the bond issuance.
Dr Interest expense $85,081
Cr Interest payable $75,000 (3 mths, Oct to Dec)
Cr Discount on bonds payable $10,081 (6 mths, July to Dec)

The $10,081 is arrived at as follows:
July 1, 2003 to April 1, 2023 = 19 yrs 9 mths, or 237 mths; so amortization for 6 mths = $398,200 x 6/237 = $10,081 (I rounded to the nearest $)

4.Conversion of bonds on April 1, 2013. (Assume that interest and discount amortization are correctly shown as of April 1, 2013. No gain or loss on conversion is recognized.)
If no gain or loss on conversion is recognized, it means that they’re telling you to use the book value of bonds method. I can’t find the interest and discount amortization as of April 1, 2013, so I have worked out my own figures.
By April 1, 2013, the discount on bonds payable would have been amortized 117 mths, and the unamortized balance was $201,620 ($398,200 less 117/237 mths’ worth of amortization $196,580)
$700,000 out of $5,000,000 (14%) were converted, so you have to remove $700,000 from bonds payable, and similarly remove 14% of $201,620 from Discount on bonds payable, or $28,227.
Using the book value of bonds method, and converting at the rate of 20 shares for every $1,000 bonds, $700,000 worth of bonds gets you 14,000 shares of par value $1 each.

Dr Bonds payable $700,000
Cr Paid in capital in excess of par $657,773
Cr Discount on bonds payable $28,227
Cr Common stock $14,000 (14,000 shares at $1 par)

5. Reacquisition and retirement of bonds on July 1, 2013.
By July 1, 2013, you’d have bonds with face value of $4,300,000. If you retire $600,000, you’re retiring $600,000/$4,300,000 or 13.95% (amounts will be different if you round this to 14%)

By July 1, 2013, you’d have Discount on bonds payable arrived at as follows:
Unamortized balance at April 1, 2013 $201,620
less portion removed upon conversion $28,227
Unamortized portion after conversion $173,393 (with 120 mths more to go)
less amortization for 3 mths $4,335 ($173,393 x 3/120)
Unamortized portion at July 1, 2013 $169,058
Amt to remove upon retirement $23,584 ($169,058 x 13.95%)

Dr Bonds payable $600,000
Dr Loss on retirement of bonds $143,584
Cr Cash $720,000 ($600,000/$1,000 x $1,200)
Cr Discount on bonds payable $23,584

You might find the attached notes useful.

Daniel asks…

Help with Conversion of Bonds Question?

On January 1, 2010, when its $41 par value common stock was selling for $108 per share, Bartz Corp. issued $13,500,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,350 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $14,310,000. The present value of the bond payments at the time of issuance was $11,475,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2011, the corporation’s $41 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2012, when the corporation’s $20 par value common stock was selling for $182 per share, holders of 20% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.

(a) Prepare in general journal form the entry to record the original issuance of the convertible debentures.

(b) Complete the two schedules and prepare in general journal form the entry to record the exercise of the conversion option, using the book value method.

Recording the conversion:

financi4 answers:

Under GAAP -
(a) DR Cash 14,310,000 CR Bonds Pay 13,500,000 CR Bond Premium 810,000

(b)
Unamortized Bond Premium = 729,000; 20% = 145,800
Conversion ratio – 10 shs per 1,350 Bond, 2,000 Bonds converted = 20,000 shares

DR Bond Premium 145,800 DR Bonds Pay 2,700,000
CR Common Stock (Par Value $20 x 20,000 shs) 400,000
CR Capital Surplus (to balance) 2,445,800

Chris asks…

How to jounalize bonds?

Selected transactions completed by Everyday Products Inc. during the fiscal year ending December 31, 2012, were as follows:

a. Issued 12, 500 shares of $25 par common stock at $32, receiving cash.
b. issued 2,000 shares of $100 par preferred 5% stock at $105, receiving cash.
c. Issued $400,000 of 10-year, 6% bonds at 105, with interest payable semiannually.
d. Declared a quarterly dividend of $0.45 per share on common stock and $1.25 per share on preferred stock. On the data of record, 85,000 shares of common stock were outstanding, no treasury share were held, and 17,000 shares of preferred stock were outstanding.
e. Paid the cash dividends declared in (d).
f. Purchased 5,500 shares of kress Corp. at $22 per share, plus a $275 brokerage commission. The investment is classified as an available-for-sale investment.
g. Purchased 6,500 shares of treasury common stock at $35 per share.
h. Purchased 36,000 shares of Lifecare Co. stock directly from the founders for $18 per share. Lifecare has 112,500 shares issued and outstanding. Everyday products Inc. treated the investment as an equity method investment.
i. Declared a 2% stock dividend on common stock and a $1.25 quarterly cash dividend per share on preferred stock. On the date of declaration, the market value of the common stock was $40 per share. On the date of record, 85,000 shares of common stock had been issued, 6,500 shares of treasury common stock were held, and 17,000 shares of preferred
stock had been issued.
j. Issued the stock certificates for the stock dividends declared in (h) and paid the cash dividends to the preferred stockholders.
k. Received $24,500 dividend from Lifecare Co, investment in (h)
l. Purchased $62,000 of Nordic Wear Inc. 10-year, 6% bonds, directly from the issuing company at par value, plus accrued interest of $550. The bonds are classified as a held-to-maturity long-term investment.
m. sold, at $42 per share, 2,600 shares of treasury common stock purchased in (g).
n. Received a dividend of $0.65 per share from the Kress Corp. investment in (f).
o. Sold 500 shares of Kress corp. at $26.50, including commission.
p. Recorded the payment of semiannual interest on the bonds issued in (c) and the amortization of the premium for six months. The amortization was determined using the straight-line method.
q. Accrued interest for three months on the Nordic Wear Inc. bonds purchased in (1).
r. Lifecare Co. recorded total earnings of $205,000. Everyday products recorded equity earnings for its share of Lifecare co. net income.
s. The fair value for Kress Corp. stock was $18.50 per share on December 31, 2012. The investment is adjusted to fair value using a valuation allowance account. Assume Valuation Allowance for Available-for-sale Investments had a beginning balance of zero.
Instructions
1. Journalize the selected transactions.
2. After all of the transactions for the year ended December 31, 2012, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data on the following page were taken from the records of Everyday Products Inc.
a. Prepare a multiple-step income statement for the year ended December 31, 2012, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 84,000 and preferred dividends were $85,000. (Round earnings per share to the nearest cent.)
b. Prepare a retained earnings statement for the year ended December 31, 2012.
c. Prepare a balance sheet in report form as of December 31, 2012.

financi4 answers:

How would you expected to have your accounting related question to be answered in a chemistry forum??

David asks…

Can You Provide Me With Accounting Help!?

I am majoring in accounting and I’m in my first year. I need a little help. I’m not trying to cheat here, just simply trying to make sure that I understand so please explain every answer that you present. I am supposed to prepare a “classified” (or current, within’ 1 year) balance sheet using the following information as of Dec. 31, 2008. A classified balance sheet is basically a ratio of current assets over current liabilities over. I know that some of these items listed aren’t even relevant in this sheet, also, but I’m just a little confused as to where I’d put a few things such as patent, prepaid rent and a few others.

Accounts payable: $18,255
Accounts receivable: $23,450
Accumulated depreciation – automobiles: $22,500
Accumulated depreciation – buildings: $40,000
Automobiles: $112,500
Bonds payable, due Dec. 31st, 2012: $160,000
Buildings: $200,000
Capital Stock, $10 par value: $150,000
Cash: 13,230
Income taxes payable: $6,200
Interest payable: $1,500
Inventory: $45,730
Land: $250,000
Long-term investments: $85,000
Notes payable, due June 30, 2008: $10,000
Office supplies: $2,340
Paid in capital in excess of par value: $50,000
Patents: $40,000
Prepaid rent: $1,500
Retained earning: $311,095
Salaries and wages payable: $4,200

financi4 answers:

A classified balance sheet is a balance sheet with assets and liabilities classified by category-
Without the #’s
Current Assets
Cash, Acc Rec, Inventory, Supplies, Prepaid Rent
Property Plant & Equipment
Land, Building, Auto, Less Acc Dep, Acc Dep
Other Assets
Patent, Long-Term Inv
Total Assets
Current Liabilities
Accounts Payable, Notes Payable, Salaries Payable, Int Pay, Tax Payable
Long Term Liabilities
Bonds Payable
Total Liabilities (current + long term)
Capital Stock
Paid in Capital
Retained Earnings
Total Equity
Total Liabilities & Equity (should equal total assets)

Mark asks…

Prepare a statement of cash flows?

Cash-20,000
A/R-21,200
Investments-32,000
Plant assets (net)-81,000
Land-40,000
A/P-30,000
Notes payable (long-term)-41,000
Common stock-100,000
Retained earnings-23,200

During 2012, the following occured:
1. Lansbury Inc sold part of its investment porfolio for 15,000. this transaction resulted in a gain of 3,400 for the firm. the company classifies its investments as available-for-sale.
2. a tract of land was purchased for 18,000 cash.
3. Long-term notes payble in the amount of 16,000 were retured before maturity by paying 16,000 cash.
4. an additional 20,000 in common stock was issued at par.
5. dividends of 8,200 were declared and paid to stockholders.
6. net income for 2012 was 32,000 after allowing for depreciation of 11,000.
7. land was purchased through the issuance of 30,000 in bonds.
8. at december 31, 2012, cash was 32,000, accounts receivable was 41,600 and accounts payable remained at 30,000.

Prepare a statement of cash flows for 2012.

If you could help me that would be great, I already did most of it but I can’t get the net increase in cash to equal 12,000.

Thank you

financi4 answers:

Lansbury Inc.
Statement of Cash Flows
For The Year Ended December 31, 2012

Cash flows from operating activities:
Net income $32,000
Items to reconcile net income to cash flows from operating activities:
Add back depreciation expense $11,000
Deduct gain on sale of investments ($3,400)
Increase in accounts receivable ($20,400)
Net cash flows from operating activities $19,200

Cash flows from investing activities:
Cash received from sale of investments $15,000
Cash paid to purchase land ($18,000)
Net cash flows from investing activities ($3,000)

Cash flows from financing activities:
Cash received from issuance of common stock $20,000
Cash paid to retire long-term notes payable ($16,000)
Cash paid for dividends ($8,200)
Net cash flows from financing activities ($4,200)

Net increase in cash $12,000
Cash balance January 1, 2012 $20,000

Cash balance December 31, 2012 $32,000

Significant non-cash investing and financing transaction:
Land purchased through issuance of bonds $30,000

Paul asks…

INC Corp. carries an account in its general ledger called Investments, which contained debits for?

INC Corp. carries an account in its general ledger called Investments, which contained debits for
investment purchases, and no credits, with the following descriptions.

February 1,
2012
The Clock Company common stock, $100 par, 200 shares $ 37,400
April 1 U.S. government bonds, 11%, due April 1, 2022, interest
payable April 1 and October 1, 110 bonds of $1,000 par
each

Instructions:
Prepare entries necessary to classify the amounts into proper accounts, assuming that all the
securities are classified as available-for-sale.

110,000

financi4 answers:

That is a home work question, not a small biz question
an accountant hired by a small biz would handle this

Powered by Yahoo! Answers