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share and recognized a $50,000 gain on its income statement on May 20.
Which of the following statements is correct?
Question 3
On January 1, 2005, Celt Corp. issued 9% bonds in the face amount of
$1,000,000, which mature on January 1, 2015. The bonds were issued
for $939,000 to yield 10%, resulting in a bond discount of $61,000. Celt
uses the effective interest method of amortizing bond discount. Interest
is payable annually on December 31. At December 31, 2005, Celt's
unamortized bond discount should be
Question 4
In 2000, May Corp. acquired land by paying $75,000 down and signing
a note with a maturity value of $1,000,000. On the note's due date,
December 31, 2005, May owed $40,000 of accrued interest and
$1,000,000 principal on the note. May was in financial difficulty and
was unable to make any payments. May and the bank agreed to amend
the note as follows: The $40,000 of interest due on December 31, 2005
was forgiven. The principal of the note was reduced from $1,000,000 to
$950,000 and the maturity date extended 1 year to December 31, 2006.
May would be required to make one interest payment totaling $30,000
on December 31, 2006. As a result of the troubled debt restructuring,
May should report a gain, before taxes, in its 2005 income statement of
Question 5
Universe Co. issued 500,000 shares of common stock in the current year.
Universe declared a 30% stock dividend. The market value was $50 per
share, the par value was $10, and the average issue price was $30 per
share. By what amount will Universe decrease stockholders' equity for
the dividend?