Prepare journal entries for the following FOUR events (use straight-line amortization)

Prepare journal entries for the following FOUR events
(use straight-line amortization).
01/01/07 The Jeff
Co issued $100,000, six year bonds, carrying a coupon rate of ten percent (10%),
interest payable annually on December 31 each year. Assume that the net
proceeds from the issue of the bond were $112,000.
12/31/07 Recognize
the first interest payment.
12/31/08 Recognize
the second interest payment.
01/01/09 Redeem
(ie, buy back) twenty percent (20%) of the bonds outstanding for $18,500.
II. Is it better for a company
to issue bonds at a discount or at a premium? Explain your answer.
III. Use the data from Problem V.
For the most recent year (2008) calculate the following ratios.
Current ratioInventory turnoverRate of return on total assetsAccounts receivable turnover (assume all sales are on
account)Debt ratio
IV. Prepare journal entries
for ABC Co’s following events.
05/12/08 Received
charter authorizing ABC Co to issue 20,000 shares of common stock at a par
value of $2 per share.
06/03/08 Issued
8,000 shares of stock, receiving $40,000.
06/04/08 Paid the
law firm of Lobello for their services to help organize the company by sending
them two thousand shares of stock.
11/15/08 Declared
a cash dividend of $2 per share, payable on 01/15/09, to holders of record as
of 12/15/08.
12/15/08 Make the
appropriate entry.
12/31/08 Make any
necessary adjusting entry.
01/15/09 Make the
appropriate entry.
06/12/09 Declared
a ten percent (10%) stock dividend, payable on 7/15/09 (ignore the date of
record for this event). The market value of the stock is $15 per share.
07/15/09 Make the
appropriate entry.
08/15/09 Declared
a two-for-one stock split. The market value of the stock is $15 per
share.
09/15/09 Declared
and paid a cash dividend of $2 per share (pretend this happens all in one day).
10/01/09 Purchased
1,000 shares of treasury stock for a total price of $30,000.
10/15/09 Declared
and paid a cash dividend of $2 per share.
11/15/09 Reissued
400 shares of treasury stock at $32 each.
12/15/09 Reissued
the remaining treasury stock at $10 per share.
V. Required
Prepare a cash flow statement for
2008 with clear documentation (ie, show your work) for each section of the statement.
Use either the direct or the indirect method.
Additional information
There were no write-offs of delinquent accounts during
the year.A building was sold during the year for $80.
Comparative balance sheets and an
income statement for 2008 are presented below for NLeash Company.
NLeash Company
Comparative Balance Sheets and
Income Statement
For the Years 2007 and 2008
Balance Sheets

2008
2007
Assets
Cash

200
185
Accounts
Receivable
350
290
Allowance for bad
debts
(45)
(25)
Inventory

260 135
Land

600
500
Buildings

295 250
Accumulated Depreciation- Buildings
(65) (80)
Total Assets

1,595 1,255
Liabilities & Owner’s Equity
Liabilities
Accounts Payable

400
305
Wages Payable

70
67
Dividends Payable

30
47
Taxes Payable

50 46
Long-term bonds
payable
100
100
Discount on bonds
payable
(8)
(10)
Total liabilities

642 555
Owner’s Equity
Common Stock

650
500
Retained Earnings

303
200
Total Owner’s
Equity

953 700
Total Liabilities & Owner’s
Equity 1,595
1,255
Income Statement (2008)
Revenue

1,200
Cost of Goods Sold

750
Gross Margin

450
Operating Expenses
Wage expense

200
Depreciation
expense
30
Bad debt expense

20
Bond interest
expense
10
Total operating
expenses

260
Net Operating
Income

190
Gain on sale of
building

40
Net income before
tax

230
Income tax

69
Net income after
tax

161
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