1- a. Completing the table below in order to calculate the interest amount on December 31, Year 1 is $36.
1-b. Using the calculated value in order to prepare the journal entries for Year 1 transactions is as follows.
Journal Entries:
To accrue interest revenue - December 31, Year 1.
1-c. Completing the table to calculate interest amount on December 31, Year 2 is $600.
1-d. By using the calculated values in order to prepare journal entries for Year 2 transactions is as follows.
Journal Entries:
Year 2
February 14
Debit Interest Receivable = $106
Credit Interest Revenue= $106 ($10,800 × 8% × 45 / 365)
Debit Cash = $10,942
Credit Interest Revenue = $142
Credit Note Receivable (Danny Todd) = $10,800
Thus, in order to record the receipt of Todd's payment of principal and interest on the note dated December 16.
March 2
Debit Note Receivable = $6,600
Credit Accounts Receivable = $6,600
To record the acceptance of an 7%, 90-day note, by granting a time extension on the past-due account receivable from Midnight
Company.
March 17 Debit Note Receivable (Ava Privet) = $3,200
Credit Accounts Receivable (Ava Privet) $3,200
To record the acceptance of a 30-day, 7% note, granting Ava Privet a time extension on her past-due account receivable.
April 16 - Debit Accounts Receivable (Ava Privet) = $3,200
Credit Note Receivable (Ava Privet) $3,200
Credit Interest Revenue $14
To record that Privet dishonored its note.
May 31 - Debit Accounts Receivable (Midnight Company) = $6,600
Credit Note Receivable (Midnight Company) = $6,100
Credit Interest Revenue = $120
By recording that the Midnight Company dishonored its note.
August 7 Debit Note Receivable (Mulan Company) = $7,350
Credit Accounts Receivable (Mulan Company) = $7,440
To record that the acceptance of a 90-day, 10% note, granting a time extension on past-due account receivable of Mulan Company.
September 3 - Debit Note Receivable (Noah Carson) = $2,470
Credit Accounts Receivable (Noah Carson) = $2,470
To record the acceptance of a 60-day, 10% note, granting Noah Carson a time extension on his past-due account receivable.
November 2 Debit Cash $2,135
Credit Note Receivable (Noah Carson) $2,100
Credit Interest Revenue = $35 ($2,100 × 10% × 60 / 365)
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Match the terms to their definition.
1. capital gains
2. commission
3. dividends
4. income.
5. Interest
6. stockholder
7. taxable income
an individual who owns one or
more shares of stock in a joint stock
company
the money received for work or
products sold and from other sources,
such as rent or investments
money paid to people who own
stock in a company from the company's
earnings
income earned by the sale of
assets, such as stocks or property, which
Income is the difference between the
price paid and the selling price
the portion of income that is subject
to being taxed
money the bank gives you when
you keep your money in one of their
accounts
a fee paid to an employee for their
sale or services, which fee is usually
based on a percentage of the sale price
The terminologies should be matched with their definition as follows:
Stockholder: an individual who owns one or more shares of stock in a joint stock company.Income: the money received for work or products sold and from other sources, such as rent or investments.Dividends: money paid to people who own stock in a company from the company's earnings.Capital gains: income earned by the sale of assets, such as stocks or property, which income is the difference between the price paid and the selling price.Taxable income: the portion of income that is subject to being taxed.Interest: money the bank gives you when you keep your money in one of their accounts.Commission: a fee paid to an employee for their sale or services, which fee is usually based on a percentage of the sale price.Who is a stockholder?A stockholder can be defined as an independent individual, organization or social group that has an interest in a particular business firm (company), and as such they can either affect or be affected by the decisions taken in the business.
In conclusion, it is very important for every business owners and stockholders to consider the consequences of capital gains tax and income tax when selling an investment.
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Oceanic Company has 15,000 shares of cumulative preferred 3% stock, $50 par and 50,000 shares of $30 par common stock. The following amounts were distributed as dividends:
20Y1 $33,800
20Y2 9,000
20Y3 67,500
Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.
The determination of the dividends per share for the cumulative preferred stock and the common stock for each is as follows:
20Y1 20Y2 20Y3
Dividend per share:Preferred Stock $1.50 $0.60 $2.40
Common Stock $0.22 $0 $0.63
How is the dividend per share determined?The dividend per share is the allotted dividend divided by the number of shares in the issue for each class of stock.
However, the dividend is first allocated to the preferred stockholders before the common stockholders.
In any year where the dividend is not sufficient for the cumulative preferred stockholders, whatever is available is shared with the preferred stockholders with the common stockholders getting nothing.
In the year that sufficient dividends exist, the cumulative preferred dividend arrears must be settled in addition to the year's fixed dividend.
Cumulative Preferred 3% Stock = 15,000 shares
Par value = $50
Value of Cumulative preferred stock, 3% stock = $750,000 (15,000 x $50)
Fixed preferred dividend each year = $22,500
Common Stock = 50,000 shares
Par value = $30
Value of Common stock = $1,500,000 (50,000 x $30)
Dividend Distribution Preferred Common Stock
20Y1 $33,800 $22,500 $11,300 ($33,800 - $22,500)
Dividend per share $1.50 $0.226 ($11,300/50,000)
20Y2 9,000 $9,000 $0
Dividend per share $0.60 $0
20Y3 67,500 $36,000 $31,500 ($67,500 - $36,000)
Dividend per share $2.40 $0.63 ($31,500/50,000)
Preferred stock dividend for 20Y2 = $36,000 ($13,500 + $22,500)
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