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  • Problem 1. Villarente Company Issued 5-Year $200,000 Face Value Bonds at 95 On January 1

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    Preetosh Srivastava
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    Villarente Company issued $200,000 face value bonds at 95% of par value on January 1, 2012. Using the effective interest rate of 10.33%, the amortization schedule shows: - Interest expense of $100,000 over the 5 years - Discount amortization of $10,000 increasing the carrying value to face value by maturity Allen Corporation issued common stock in three transactions, raising $1,915,000 and issued preferred stock, raising $170,500. The transactions increased assets and shareholders' equity. After the transactions, total shareholders' equity was $2,948,000 and 82,500 shares of common stock were outstanding.

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    Manangement Questions

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    Villarente Company issued $200,000 face value bonds at 95% of par value on January 1, 2012. Using the effective interest rate of 10.33%, the amortization schedule shows: - Interest expense of $100,000 over the 5 years - Discount amortization of $10,000 increasing the carrying value to face value by maturity Allen Corporation issued common stock in three transactions, raising $1,915,000 and issued preferred stock, raising $170,500. The transactions increased assets and shareholders' equity. After the transactions, total shareholders' equity was $2,948,000 and 82,500 shares of common stock were outstanding.

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    Problem 1. Villarente Company Issued 5-Year $200,000 Face Value Bonds at 95 On January 1

    Uploaded by

    Preetosh Srivastava
    Villarente Company issued $200,000 face value bonds at 95% of par value on January 1, 2012. Using the effective interest rate of 10.33%, the amortization schedule shows: - Interest expense of $100,000 over the 5 years - Discount amortization of $10,000 increasing the carrying value to face value by maturity Allen Corporation issued common stock in three transactions, raising $1,915,000 and issued preferred stock, raising $170,500. The transactions increased assets and shareholders' equity. After the transactions, total shareholders' equity was $2,948,000 and 82,500 shares of common stock were outstanding.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Problem 1.

    Villarente Company issued 5-year $200,000 face value bonds at 95 on January 1,


    2012. The stated interest rate on these bonds is 9%, and the effective interest rate is 10.33%. Use
    the effective interest rate method to complete the amortization schedule below.

    Cash
    1-Jan-12
    31-Dec-12
    31-Dec-13
    31-Dec-14
    31-Dec-15
    31-Dec-16
    Total

    18000
    18000
    18000
    18000
    18000

    Interest
    Expense

    19627
    19795.
    07
    19981
    20185.
    23
    20410.
    94
    100,00
    0

    Discount
    Amortization

    Carrying Value

    1627

    190000
    191627

    1795.07
    1981.00

    193422.07
    195404.00

    2185.23

    197589.00

    2410.94

    200000.00

    10,000.00

    Problem 2. Allen Corporation was organized on July 15, 2012. It was authorized to issue
    150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred
    stock. The preferred stock had a stated value of $50 per share. The following stock transactions
    relate to Allen Corporation.

    Issued 55,000 shares of common stock for $33 per share.


    Issued 2,750 shares of the class A preferred stock for $62 per share.
    Issued 27,500 shares of common stock for $35 per share.

    Required:
    1) Indicate the effect of each of these transactions on Allen's financial statements. Include dollar
    amounts in the model, below. After recording the three transactions, calculate column totals.
    2) After these transactions have been recorded, what is the total amount of stockholders' equity?
    3) After these transactions have been recorded, how many shares of common stock are
    outstanding?
    1.
    Sr.
    No

    Assets

    Equity

    Cash
    Flow

    Cash

    Common
    Stock

    Paid-in
    Capital in
    Excess of
    Par Value

    1815000

    1375000

    170500

    962500

    687500

    275000

    Total

    2948000

    2062500

    715000

    Preferred +
    Stock

    Paid-in
    Capital in
    Excess of
    Stated Value

    440000

    1815000
    137500

    2. Total Shareholders' Equity is $2948000.


    3. Total outstanding shares are 82,500.

    33000

    170500
    962500

    137500

    33000

    2948000

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