accounting

| September 28, 2018

E10-9Northeast Airlines is considering two alternatives for the financing of a purchase of afleet of airplanes.These two alternatives are:1.Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid noris the payment of any contemplated.)2.Issue 10%, 10-year bonds at par for $2,700,000.It is estimated that the company will earn $800,000 before interest and taxes as a result of thispurchase.The company has an estimated tax rate of 30% and has 90,000 shares of common stockoutstanding prior to the new financing.InstructionsDetermine the effect on net income and earnings per share for these two methods of financing.E10-10On January 1, Neuer Company issued $500,000, 10%, 10-year bonds at par. Interest ispayable semiannually on July 1 and January 1.InstructionsPresent journal entries to record the following.(a)The issuance of the bonds.(b)The payment of interest on July 1, assuming that interest was not accrued on June 30.(c)The accrual of interest on December 31E10-11On January 1, Flory Company issued $300,000, 8%, 5-year bonds at face value.Interest is payable semiannually on July 1 and January 1.InstructionsPrepare journal entries to record the following events.(a)The issuance of the bonds.(b)The payment of interest on July 1, assuming no previous accrual of interest.(c)The accrual of interest on December 31.E10-15Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable tofinance the construction of a building at December 31, 2011. The terms provide for semiannualinstallment payments of $20,000 on June 30 and December 31.InstructionsPrepare the journal entries to record the mortgage loan and the first two installment payments.*E10-18Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for$562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payablesemiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortizebond premium or discount.InstructionsPrepare the journal entries to record the following. (Round to the nearest dollar.)(a)The issuance of the bonds.(b)The payment of interest and the discount amortization on July 1, 2011, assuming that interestwas not accrued on June 30.(c)The accrual of interest and the discount amortization on December 31, 2011.*P10-8ASoprano Electric sold $3,000,000, 10%, 10-year bonds on January 1, 2011. The bondswere dated January 1 and pay interest July 1 and January 1. Soprano Electric uses the straightlinemethod to amortize bond premium or discount. The bonds were sold at 104. Assume nointerest is accrued on June 30.Instructions(a)Prepare the journal entry to record the issuance of the bonds on January 1, 2011.(b)Prepare a bond premium amortization schedule for the first 4 interest periods.(c)Prepare the journal entries for interest and the amortization of the premium in 2011 and2012.(d)Show the balance sheet presentation of the bond liability at December 31, 2012.

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