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m_a_m_a [10]
3 years ago
13

On January 1, 2011, Ozark Minerals issued $10 million of 9%, 10-year convertible bonds at 101. The bonds pay interest on June 30

and December 31. Each $1,000 bond is convertible into 40 shares of Ozark's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99. Upon issuance, Ozark should Credit premium on bonds payable $100,000. Why?
Business
2 answers:
Lubov Fominskaja [6]3 years ago
8 0

Answer:

The rationale for crediting premium on bonds payable with $100,000 is that premium on the bonds issuance is $100,000 as shown below.

Explanation:

The total cash proceeds realized from the bond issuance is $10,100,000($10,000,000*101%=$ 10,100,000) which is automatically debited to cash/bank account  since it is an inflow of cash.

However, the corresponding credit entry should be broken into par value which goes into the bonds payable account as the amount owed to bondholders and the extra shows up in bonds premium account, the analysis is done below:

Cash proceeds                                                     $10,100,000

less;amount credited to bonds payable  

100/101*$10,100,000                                           ($10,000,000)

Balancing figure(premium on bonds)                      $100,000

The premium can also be computed in an alternative way shown below

(premium)/(premium+par)*cash proceeds

1/(1+100)*$10,100,000                                         $100,000    

horsena [70]3 years ago
5 0

Answer:

Explanation:

Bonds are corporate debt units that are issued by firms inform of financial securities and  are traded as tradeable assets. It is basically referred to as a fixed income instrument since bonds conventionally are paid a certain fixed amount of interest rate (coupon) to its respective debtholders.

going by the question Upon issuance, Ozark should

Credit premium on bonds payable $100,000

Because face value of bonds =  $10 million but issue price is  $10 million * 101 % i.e $ 10100000

So, premium = 10100000 - 10000000 = $ 100000

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Y_Kistochka [10]

Answer: Financial Notes and Supplementary Schedules

Explanation:

The Financial Notes and Supplementary Schedules is also known as footnotes.

The notes discloses-

a. Assumptions used in the preparation of the financial statements.

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8 0
3 years ago
Which is the correct sequence for recording transactions and preparing financial​ statements?
zheka24 [161]

Answer:

The answer is B.

Explanation:

The first is the journal. A journal entry may be a summary of the debits and credits of the transaction entry to the journal.

Followed by a ledger which may be a book containing accounts during which the classified and summarized information from the journals is posted as debits and credits.

Trial balance which is that the listing of all accounts (asset, liability, equity, revenue, expense) with the ending account balance or or its a report that lists the balances of all book accounts of a corporation at a specific point in time.

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8 0
3 years ago
Company's Z's earnings and dividends per share are expected to grow indefinitely by 4% a year. Assume next year's dividend per s
Kazeer [188]

Answer:

Explanation:

First, we need to find current stock price, which equals to Next year dividend / (required rate of return - growth rate)

=4 / (0.08 - 0.04)

= $4 / 0.04 = $100

Then we can apply the found current stock price to find present value of growth opportunities

Present value of growth opportunities =current stock price - [forcasted Earning per share / required rate of return]

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6 0
3 years ago
For inventory systems with constant demand and a fixed lead time,
7nadin3 [17]

Answer:

a.the reorder point = lead-time demand

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Lead time is the time between when an order is placed and when delivery of goods and services is made.

So when there is constant demand and fixed lead time, there is no need to keep excess inventory as demand has been anticipated and inventory for the demand is available.

Also the lead time demand from order to delivery is also fixed because demand has been provided for already.

Thus reorder point= lead time demand

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