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with the right attached was $40, while the market price of one
right alone was $2. Vail's stockholders' equity on June 30, 2005
comprised the following: By what amount should Vail's retained
earnings decrease as a result of issuance of the stock rights on
July 1, 2005?
Question 8
On January 1, 2005, Wolf Corp. issued its 10% bonds in the face
amount of $1,000,000, which mature on January 1, 2015.The
bonds were issued for $1,135,000 to yield 8%, resulting in bond
premium of $135,000. Wolf uses the effective interest method of
amortizing bond premium. Interest is payable annually on
December 31. At December 31, 2005, Wolf's adjusted
unamortized bond premium should be
Question 9
Earl was engaged by Farm Corp. to perform consulting services.
Earl's compensation for these services consisted of 1,000 shares of
Farm's $10 par value common stock, to be issued to Earl on
completion of Earl's services. On the execution date of Earl's
employment contract, Farm's stock had a market value of $40 per
share. Six months later, when Earl's services were completed and
the stock issued, the stock's market value was $50 per share.
Farm's management estimated that Earl's services were worth
$100,000 in cost savings to the company. As a result of this
transaction, additional paid-in capital should increase by
Question 10
During 2005, Eddy Corp. incurred the following costs in
connection with the issuance of bonds: What amount should be
recorded as a deferred charge to be amortized over the term of
the bonds?