165. Ulmer Company is considering the following alternative financing plans:
Plan 1
Plan 2
Issue 8% bonds at face value
$2,000,000
$1,000,000
Issue preferred $1 stock, $15 per share
---
1,500,000
Issue common stock, $10 par
2,000,000
Income tax is estimated at 35% of income.Required: Determine the earnings per share of common stock, assuming income before bond interest and income tax is $600,000.
166. Two companies are financed as follows:
Bonds payable, 9% issued at face
$5,000,000
$3,000,000
Common stock, $20 par
3,000,000
Income tax is estimated at 40% of income.Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $1,500,000 each.
167.
(a)
Prepare the journal entry to issue $200,000 bonds which sold for $195,000.
(b)
Prepare the journal entry to issue $200,000 bonds which sold for $204,000.
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