Question

1.

Pillsbury Company declares and distributes a 30​% common stock dividend when it has 40,000 shares of​ $10 par common stock outstanding. The market price per share is $40 at the date of declaration. Which journal entry is​ prepared?

A.debit Retained Earnings $480,000​

credit Common Stock $120,000

credit Paid−in Capital in Excess of Par—Common $360,000

B.debit Retained Earnings $120,000

credit Common Stock $120,000

C.debit Retained Earnings $480,000

credit Common Stock $480,000

D.debit Retained Earnings $480,000​,

credit Paid−in Capital in Excess of Par—Common $ 480,000

2.

Solderman Company issued $520,000​, 6​%, 10−year bonds for $422,800 with a market rate of 8​%. The effective interest method of amortization is used and interest is paid annually. The journal entry on the first interest payment date would include​ a:

A.credit to Cash of $33,824.

B.credit to Interest Expense of$33,824.

C.credit to Cash of $31,200.

D.credit to Interest Expense of $31,200.

3.

On January​ 1, 2018, bonds with a face value of $118,000 were sold. The bonds mature on January​ 1, 2028. The face interest rate is 6​%.The bonds pay interest semiannually on July 1 and January 1. The market rate of interest is 12​%. What is the market price of the bonds on January​ 1, 2018? The present value of​ $1 for 20 periods at 6​% is 0.312. The present value of an ordinary annuity of​ $1 for 20 periods at 6​% is 11.47. The present value of​ $1 for 20 periods at 3​% is 0.554. The present value of an ordinary annuity of​ $1 for 20 periods at 3​% is 14.878.​(Round your final answer to the nearest​ dollar.)

A.

$77,420

B.

$118,000

C.

$121,540

D.

$ 118,040

Answer 1

1		Common Stock par value	$ 400,000.00
		Stock Dividend @ 30%	$120,000
		Debit	Retained Earnings	$120,000
		Credit	common Stock		$120,000
		Option B is correct
2		Bonds 6% par value		$520,000
		Interest(520000*6%)	$    31,200.00
		Debit	Interest	$31,200
		Credit	Cash		$31,200
		Option C is correct
3		Face Value of bond		$ 118,000.00
		Interest @ 6%
		Interest installment		$      3,540.00
		PV of Installment		3540*11.47	$ 40,603.80
		pv of Bond maturity	118000*.312	$ 36,816.00
		PV OF BOND			$        77,420
		Option A is correct