Ans Doc231Y

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1. for each of the following independent situations, determine: (a) whether the bonds sold at face (maturity) value, at a premium (more than face value), at a discount (less than face value), and (b) whether interest expense recognized each year for the bonds was less then, equal to or greater than the amount of interest paid on the bonds.
I. The bonds with a stated rate of 8% were sold to yield an effective rate of 9%.
II. The bonds with a stated rate of 12% were sold to yield an effective rate of 9%.
III. The bonds with a stated rate of 9% were sold to yield an effective rate of 9%.
2. For each of the situations that follow, determine whether a liability should be reported on the balance sheet. If a liability should be reported, suggest an account name and indicate whether it should be reported as a current liability or as a long term liability. If no liability should be reported indicate why.
I. The last installment payment on a three year note payable is due next month.
II. Specialized production machinery has been acquired under a capital lease.
III. A $14 million lawsuit has been filed by a customer who claims injury from one of the company’s products.
IV. The labor services of employees have been consumed but not paid for yet. Payment is not anticipated until the next regular payday in two weeks.
V. A 20 year issue of bonds has been outstanding for 19 years and is expected to be repaid in cash at its maturity date.
VI. The company has signed a contract promising to buy $600,000 worth of merchandise during the coming year.
3. Fast Start Corporation manufactures automobile ignitions. Selected portions of the company’s recent financial statements are given on the following page.
I. What was fast starts total contributed capital at year end?
II. How many shares of common stock were outstanding at year end?
III. What dollar amount of treasury stock did fast start hold at year end?
IV. What dollar amount of treasury stock did fast start repurchase during the year? How much common stock did the company issue?
V. What was the amount of dividends paid during the year?
VI. How much cash flow came from financing activities associated with shareholders equity during the current year, excluding the effect of net income? What were the sources of the cash flow?
VII. How much net income came from financing activities associated with shareholders equity during the current year?