(TCO A) On March 1, 2010, Ruiz Corporation issued $800,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2030. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2010, the fair market value of Ruiz's common stock was $40 per share and the fair market value of the warrants was $2.00. What amount should Ruiz record on March 1, 2010 as paid-in capital from stock warrants?
Problem 17-15 on Distribution to Shareholders based on Chapter 17 Payout Policy Suppose that all capital gains are taxed at a 25% rate and that the dividend tax rate is 50%. Arbuckle Corporation is currently trading for $30 and is about to pay a $6 special dividend. a. Absent any other trading frictions or news, what will its share price be just after the dividend is paid? Suppose Arbuckle made a surprise announcement that it would do a share repurchase rather than pay a special dividend.
Chapter 01 The Equity Method of Accounting for Investments Multiple Choice Questions 1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2008 and paid dividends of $60,000 on October 1, 2008. How much income should Gaw recognize on this investment in 2008? A.
A. $1,320 B. $1,270 C. $320 D. $2,320 5. A company purchased inventory for $800 per unit. The inventory was marked up to sell for $1,000 per unit.
Chapter 15 52. [LO 3] Evon would like to organize SHO as either an LLC or as a C corporation generating an 11 percent annual before-tax return on a $200,000 investment. Assume individual and corporate tax rates are both 35 percent and individual capital gains and dividend tax rates are 15 percent. SHO will pay out its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume Evon is the sole owner of the entity and ignore self-employment taxes.
Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio? M/B= Market price per share/ Book value per share Market price per share = $75/ share Book value per share= Common equity/ shares outstanding = $6 billion/ 800 million shares = $6 billion/ .8 billion shares= 7.5 M/B = $75/ 7.5 = 10 (3-4) Price/Earnings Ratio: A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0.
Assume Ken’s modified adjusted gross income for purposes of the bond interest exclusion and for determining the taxability of his Social Security benefits is $70,000 and that Ken files as a single taxpayer. Determine Ken’s 2009 gross income. Solution: Ken’s Gross Income for 2009 is $58,000 Description | Amount | a. Rare gambling winnings | $1,200 | b. Income from sale of stock | $1,000 | c. Income gain from annuity | $14,500 | d. Social Security | $11,050 | f. Scholarship | $200 | h. State taxes refund | $50 | i.
Each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm’s straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? Question 24 Europa Corporation is financing an ongoing construction project.
| | 8.78% | | 10.73% | | 11.71% | | 9.76% | | 4.88% | Redesigned Computers has 10 percent coupon bonds outstanding with a current market price of $910.00. The yield to maturity is 11.34 percent and the face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures? | 12 years | | 13 years | | 15 years | | 21 years | | 14 years
4. Norton Co., a U.S. corporation, sold inventory on December 1, 2011, with payment of 10,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: What amount of foreign exchange gain or loss should be recorded on January 30? A. $1,516 gain.