PROBLEM I:
Below is the stockholders’ equity section of the Withers Corporation balance sheet at the start of business on January 1, 2019:
Common Stock:
2,000,000 shares authorized: 40,000 shares of $6 par value sock issued and outstanding:
$240,000
Common Stock-Additional Paid-in Capital:
$2,160,000
$2,400,000
Retained Earnings:
$3,600,000
Total Stockholders’ Equity $6,000,000
The relevant transactions affecting Withers’ Stockholders’ Equity accounts in 2019 were as follows:
Jan. 1:
Issued 20,000 shares of $100 Par Value, 3% Preferred Stock
Jan. 2:
Declared a 2:1 stock split
Feb.1:
Purchased equipment valued at $240,000 by issuing 8,000 shares of common stock.
Apr.1:
Declared and issued a 10% stock dividend when the common share price was $35.
June 1:
Reacquired 3,000 shares @ $40 per share.
Dec. 15:
Declared a $2 per dividend on the common that will be paid on December 30.
Dec. 30:
Paid the December 15th
dividend.
Dec. 31:
The 2019 net income for Withers was $940,000.
REQUIRED;
Make the necessary journal entries for each of the above dates.
PROBLEM II
Part I
On April 1, 2019 Berry Corporation issued an $8,000,000, 10-year, 6% bond at 94 because the market rate of interest on that date was 8%. Interest is payable semi-annually.
REQUIRED:
Make the necessary journal entries for the following dates:
Apr. 1, 2019:
The day the bond was issued.
Sept. 30, 2019:
The first interest payment under the straight-line method of bond discount amortization.
Sept. 30, 2019:
The first interest payment under the
effective interest method of bond discount amortization.
Dec. 31, 2019:
The necessary adjusting entry under the straight-line method.
Dec. 31, 2019
The closing entry under the straight-line method of amortization.
Part II
Let’s say that on April 1, 2019 Berry Corporation issued an
$8,000,000, 10-year, 8% bond at 105 because the market rate was 6%. Interest is payable semi-annually.
REQUIRED:
Make the necessary journal entries for the following dates:
Apr. 1, 2019:
The day the bond was issued.
Sept. 30, 2019:
The first interest payment under the straight-line method of bond discount amortization.
Sept. 30, 2019:
The first interest payment under the
effective interest method of bond discount amortization.
Dec. 31, 2019:
The necessary adjusting entry under the straight-line method.
Dec. 31, 2019
The closing entry under the straight-line method of amortization.
PROBLEM III:
On January 1, 2017, Tandler Corporation issued a $3,000,000, 10-year, 6% bond at 95. On January 1, 2020 Tandler recalled the entire bond issue at 101.
REQUIRED:
Make the necessary journal entry for
January 1, 2020
the day the bond was retired.