ACC206 Strayer Sandhill Corporation Long-term Liabilities Accounting Help
Long-Term Liabilities”
Assume you are the chief financial officer of large corporation seeking to raise additional capital to finance a plant expansion. The corporation is weighing the decision to issue convertible bonds or common stock to finance the expansion. What is a convertible bond? Explain the advantages of a convertible bond from the perspective of (a) the bondholders and (b) the issuing corporation. Explain the advantages of issuing common stock from the perspective of (a) the stockholders and (b) the issuing corporation. Make a recommendation to the chief executive officer on the best choice for the corporation based on the advantages provided.
Sandhill Corporation issued 4,000, 6%, 5-year, $1,000 bonds dated January 1, 2020, at 100. Interest is paid each January 1.
(a)
Prepare the journal entry to record the sale of these bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Janaury 1, 2020
(b)
Prepare the adjusting journal entry on December 31, 2020, to record interest expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2020
(c)
Prepare the journal entry on January 1, 2021, to record interest paid. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
January 1, 2021
Brief Exercise 15-11
Wildhorse Company leases a new building from Noble Construction, Inc. The present value of the lease payments is $525,000. The lease is a finance lease. Prepare the journal entry that the lessee should make to record this transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Brief Exercise 15-08
Presented below are long-term liability items for Oriole Company at December 31, 2020.
Bonds payable, due 2022 $600,000
Lease liability 80,000
Notes payable, due 2025 90,000
Discount on bonds payable 42,000
Prepare the long-term liabilities section of the balance sheet for Oriole Company. (Enter account name only and do not provide descriptive information.)
Oriole Company
Balance Sheet (Partial)
$
:
$
$
Exercise 15-12
Wildhorse Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:
1. Issue 80,850 shares of common stock at $30 per share. (Cash dividends have not been paid nor is the payment of any contemplated.)
2. Issue 8%, 10-year bonds at face value for $2,425,500.
It is estimated that the company will earn $838,500 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 116,000 shares of common stock outstanding prior to the new financing.
Determine the effect on net income and earnings per share for these two methods of financing. (Round earnings per share to 2 decimal places, e.g. 2.25.)
Plan One Issue Stock
Plan Two Issue Bonds
Net income
$
$
Earnings per share
$
Exercise 15-04 a-d (Part Level Submission)
Sandhill Company issued $308,000 of 8%, 10-year bonds on January 1, 2020, at face value. Interest is payable annually on January 1.
(a)
Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2020
(b)
Prepare the journal entry to record the accrual of interest on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2020
(c)
Prepare the journal entry to record the payment of interest on January 1, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2021
(d)
Prepare the journal entry to record the redemption of bonds at maturity, assuming interest for the last interest period has been paid and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2027
Exercise 15-09
Crane Co. receives $267,000 when it issues a $267,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2020. The terms provide for annual installment payments of $44,500 on December 31.
Prepare the journal entries to record the mortgage loan and the first two payments. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
