Answers
Plan 1 |
Plan 2 |
||
A |
Net Income before interest and tax |
$240,000 |
$240,000 |
B = Face value x 10% |
Bond interest |
$80,000 |
$40,000 |
C = A - B |
Net Income before tax |
$160,000 |
$200,000 |
D = C x 40% |
Income tax expense |
$64,000 |
$80,000 |
E = C - D |
Net Income |
$96,000 |
$120,000 |
F |
Preferred dividend |
$0 |
$66,000 |
G = E - F |
Net Income for common stockholders |
$96,000 |
$54,000 |
H = Common Stock $ / $ 5 par |
Common Stock shares outstanding |
160,000 |
108,000 |
I = G/H |
Earnings per share = ANSWER |
$ 0.60 |
$ 0.50 |
Accounts title |
Debit |
Credit |
|
[a] |
Cash |
$750,000 |
|
Bonds Payable |
$750,000 |
||
(to record issuance) |
|||
[b] |
Interest Expense |
$37,500 |
|
Cash |
$37,500 |
||
(first interest payment) |
|||
[c] |
Bonds Payable |
$750,000 |
|
Cash |
$750,000 |
||
(to record payment at maturity) |
NUM Alternative Financing Plans Frey Co. is considering the following alternative financing plans: Plan 2 Issue...
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