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Problem 1. Villarente Company issued 5-year $200,000 face value
bonds at 95 on January 1, 2012. The stated interest rate on these bonds is 9%,
and the effective interest rate is 10.33%. Use the effective interest rate
method to complete the amortization schedule below.

Cash
Payment

Interest Expense

Discount Amortization

Carrying
Value

January
1, 2012

December
31, 2012

December
31, 2013

December
31, 2014

December
31, 2015

December
31, 2016

Totals

Problem 2. Allen Corporation was organized on July 15, 2012. It was
authorized to issue 150,000 shares of $25 par value common stock and 50,000
shares of 6% cumulative preferred stock. The preferred stock had a stated value
of $50 per share. The following stock transactions relate to Allen Corporation.

Issued 55,000 shares
of common stock for $33 per share.

Issued 2,750 shares of
the class A preferred stock for $62 per share.

Issued 27,500 shares
of common stock for $35 per share.

Required:

1) Indicate the effect of each of these transactions on Allen’s financial
statements. Include dollar amounts in the model, below. After recording the
three transactions, calculate column totals.
2) After these transactions have been recorded, what is the total amount of
stockholders’ equity?
3) After these transactions have been recorded, how many shares of common stock
are outstanding?

Assets

=

Equity

Cash Flow

Cash

Common Stock

+

Paid-in Capital in Excess of Par Value

+

Preferred Stock

+

Paid-in Capital in Excess of Stated Value

Problem 1. Villarente Company issued 5-year $200,000 face value
bonds at 95 on January 1, 2012. The stated interest rate on these bonds is 9%,
and the effective interest rate is 10.33%. Use the effective interest rate
method to complete the amortization schedule below.

Cash
PaymentInterest ExpenseDiscount AmortizationCarrying
ValueJanuary
1, 2012December
31, 2012December
31, 2013December
31, 2014December
31, 2015December
31, 2016TotalsProblem 2. Allen Corporation was organized on July 15, 2012. It was
authorized to issue 150,000 shares of $25 par value common stock and 50,000
shares of 6% cumulative preferred stock. The preferred stock had a stated value
of $50 per share. The following stock transactions relate to Allen Corporation.

Issued 55,000 shares
of common stock for $33 per share.
Issued 2,750 shares of
the class A preferred stock for $62 per share.
Issued 27,500 shares
of common stock for $35 per share.
Required:

1) Indicate the effect of each of these transactions on Allen’s financial
statements. Include dollar amounts in the model, below. After recording the
three transactions, calculate column totals.
2) After these transactions have been recorded, what is the total amount of
stockholders’ equity?
3) After these transactions have been recorded, how many shares of common stock
are outstanding?

Assets=EquityCash FlowCashCommon Stock+Paid-in Capital in Excess of Par Value+Preferred Stock+Paid-in Capital in Excess of Stated Value

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