- SG Electronics is considering two plans for raising $3,000,000 to expand operations. Plan A is to issue 6% bonds payable, and plan B is to issue 100,000 shares of common stock. Before any new financing, SG has net income of $300,000 and 200,000 shares of common stock outstanding. Management believes the company can use the new funds to earn additional income of $500,000 before interest and taxes. The income tax rate is 40%.
Analyze SG Electronics’ situation to determine which plan will result in higher earnings per share. Use the following figure as a guide.
- Captain Johnny Whizbang Hamburgers, Inc., issued 4%, 10-year bonds payable at 85 on December 31, 2010. At December 31, 2012, Captain Johnny reported the bonds payable as follows:
Captain Johnny uses the straight-line amortization method and pays semiannual interest each June 30 and December 31.
R1. Answer the following questions about Captain Johnny Whizbang’s bonds payable:
R2. Record the June 30, 2013, semiannual interest payment and amortization of discount.
R3. What will be the carrying amount of the bonds at December 31, 2013?
- The accounting records of Path Leader Wireless include the following:
Report these liabilities on the Path Leader Wireless balance sheet, including headings and totals for current liabilities and long-term liabilities.