Problem #1

You must use an “Excel” spreadsheet for your answers. Be sure to show all computations in order to receive full credit.

Avilon Corp, needs to raise a minimum of $50,000,000 for a major expansion. The Board of Directors is considering selling bonds to raise the required amount. The three options they are considering are as follows:

#1) $50,000,000, 15 year, 6% bonds; interest paid semi-annually; sold to yield 8%.

#2) $50,000,000, 15 year, 6% bonds, interest paid semi-annually; sold to yield 4%.

#3) $50,000,000, 15 year, 6% bonds, interest paid semi-annually; sold to yield 6%.

Required:1) Compute the selling price of the bonds under the three different

options.

2) For option #1, prepare an amortization schedule using the effective interest method. Be sure to adjust the last payment’s interest,

up or down, so that the bond carrying value equals $50,000,000.

3) Indicate what option would be the best, and support your answer.

Problem #2 You must use or an “Excel” spreadsheet for your answers.

Sixnut, Incorporated has been authorized to issue 1,000,000 shares of $2 par common stock, and 50,000 shares of 6%, $100 par, cumulative, preferred stock. During the first six months of operation, the following transactions occurred related to the stock.

Jul 1stSold 150,000 shares of common stock for $10 per share, and 25,000

shares of preferred stock, sold at par.

Jul 1st Issued 100,000 shares of common stock in exchange for the following

assets:Land$250,000

Building 750,000

Equipment 300,000

Inventory 200,000

The market value of the stock was $15 per share.

Sep 1stSold 100,000 shares of common stock for $20 per share.

Oct 31stRepurchased 30,000 shares of common stock for $25 per share. Sixnut

has elected to use the cost method to account for the treasury stock.

Nov 30thRe-sold 20,000 shares of the treasury stock for $35 per share.

Dec 31stRecorded net income for the first six months in the amount of $4,500,000.

(Hint: Debit: Income Summary; Credit: ??)

Required:Prepare, in proper form, the journal entries required to account for these

transactions.

Problem #3 You must use an “Excel” spreadsheet for your answers.

In the second year of operations, Sixnut engaged in the following transactions related to their stock.

Note: Use the information from Problem #2 to determine the number of shares of stock outstanding.

Mar 31stDeclared a $1 per share dividend to the common stockholders of record at

April 15th, payable on April 30th.

Mar 31st Declared ½ of the annual preferred stock dividend to the stockholders of

record at April 15th, payable on April 30th.

Jun 30thDeclared a 2 for 1 stock split.

Jul 31stDeclared a 10% stock dividend to the common stockholders of record at

August 15th, to be distributed on August 31st. The market value of the

Stock on July 31st was $30 per share.

Sep 30thDeclared ½ of the annual preferred stock dividend to the stockholders of

record Oct 15th, payable on Oct 31st.

Required:Prepare, in proper form, the journal entries required to account for the

dividend transactions.