1. Hurst Corp.
1. Hurst Corp. sold its 8% bonds with a maturity value of 3,000,000 on August 1, 2009 for $2,946,000. At the time of sales the bonds had 5 years until they reach maturity. Interest on the bond is payable semi-annually on August 1 and February 1. The bonds are callable at 104 at anytime after August 1, 2011. On October 1, 2011the market rate of interest decides and market price of Hurst bond has risen to a p[rice of 101. The firm decides to refund the bond by selling a new 6% bond issue to mature in 5 years. Hurst begins to reacquire its 8%bons on the market and is able to to purchase $500,000worth at 101. The remainder of the outstanding bonds is reacquired by exercising the bonds call feature. In the final analysis, how much was the gain or loss expected by Hurst in reacquiring its 8% bond and assume the firm uses straight-line amortization. Show your calculations……… 2. Parker Corp has issued 2000 shares of common stock and 400 shares of preferred stock for a lump sum of $72,000 cash. Instructions: a. Give the entry for the issuance, assuming the par value of common stock was $5 and market value $30 and the par value of the preferred was $40 and market value $50.(Each valuation is on a per share basis and there are ready markets to each stock. b. Give the entry for the issuance assuming the same facts as (a) above except the preferred stock has no ready market value and common stock has a market value of $25 per share. 3. The shareholders equity section of Lemay Corp shows the following on December 31, 2011: Preferred stock = 6%, 4,100par, 4000 shares outstanding $400,000 Common stock = $20par, 60,000 shares outstanding 600,000 Paid in capital in excess par 200,000 Reatained earnings 114,000 Total stockholders equity 1,314,000 Instructions: Assuming that all of the company’s retained earnings are to be paid out in dividends on 12/31/2011 and preferred dividends wee last paid on 12/31/09, show how much the common and preferred stockholders should receive if the preferred stock is cumulative nad fully participating. 4. At Dec. 31,. 2010, Kifer Company had 500,000 shares of common stock outstanding on October 1, 2011. An additional 100,000 shares of common stock were issued. In addition Kifer had $10,000,000 of 6% convertible bonds outstanding at December 31, 2010 which are convertible into 225,000 shares of common stock. No bonds were converted into common stock in 2011. The Net Income for the year ended Dec. 31, 2011 was $3,000,000. Assuming the income tax rate was 30% what would be the diluted earnings per share for the year ended Dec. 31, 2011, rounded to the nearest penny. Show all computation. 5. On May 1, 2010, Kirmer Corp purchases $450,000 of 12% bond with interest payable on January 1 and July 1 for $422,800 plus accrued interest. The bonds mature on January 1, 2016. Amortization is recorded when interest is received by straight line method by months and rounded to the nearest dollar. Assume bonds are available for sale, Instructions; a. Prepare the entry for May 1, 2010 b. B. The bonds are sold on August 1, 2011 for $425,000 plus accrued interest. Prepare all required entries to properly record the sale.