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# Surname 1

Name

Course

Date

Professor

8-1
Future value = \$750,000
Present value interest factor (8%, 6 years) = 0.630
At initial investment = \$750,000 * 0.630 = \$472,500
8-4
Repayment schedule
Year Beginning balance Ending balance before payment payment
1 \$164,440 184,173 40,000
2 144,173 161,473 40,000
3 121,473 136,050 40,000
4 96,050 107,576 40,000
5 67,576 75,685 40,000
6 35,685 39,967 39,967

8-6
April 1, 2008
Dr. Cash 260,000
Cr. Bonds 250,000
Payable
Cr. Bond 10,000

October 1, 2008
Dr. Interest 10,000
Expense
Cr. Cash 10,000
Dr. Bond 500
Surname 2

expense

## December 31, 2009

Dr. Interest 2,500
Expense
Cr. Interest 2,500
Expense
Dr. Bond 250
Cr. Interest 250
Expense

April 1, 2009
Dr. Interest Expense 2,500

## Cr. Interest Payable (10,000 * 2,500

3/12)
Dr. Bond Premium 250

## Cr. Interest Expense(10,000 * 250

3/12)

9-1
A)
Debt/Equity Ratio
= Total debt/shareholders’ equity
97,920/146,880 = 66.7%
Debt/capitalization ratio
Total long term debt including current portion of long term debt/ Equity + long term debt
79,560/226,440
= 35.1%
Total long term debt excluding current portion of long term debt/ Equity + long term debt
73,440/220,320
= 33.3%
Surname 3

B)
Both ratios are used to show the percentage of debt financing as compared to owners’ equity.
This is termed as the financial leverage in the firm capital structure. The purpose of calculating
the ratios is to determine the most appropriate ratio for the company financial structure.
9-2
A)
Basic earnings per share = (net income - preferred dividends)
Number of shares outstanding
Basic earnings per share = (19,550,000-3,900,000)/ 2,000,000 shares
= \$7.83 per share
B)
Diluted earnings per share = (19,550,000-3,900,000)
2,000,000 + (200,000 – 100,000)
9-3

= 250,000 shares

9-5

January 1, 2011
Surname 4

1)

stock

2)

stock

3)

February 1, 2011

9-6

## a) Common shares issued in 2010

800,000/10 = 80,000

650,000/10 = 65,000
Surname 5

## 80,000 – 65,000 = 15,000 shares

b)

(300,000 – 150,000)/ 50

=3,000 shares

150,000 + 25,000

= 175, 000

175,000/3,000

c)

= 15 per share

d)

Surname 6