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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?
Question 6
On July 1, 2005, Day Co. received $103,288 for $100,000 face
amount, 12% bonds, a price that yields 10%. Interest expense
for the six months ended December 31, 2005 should be
Question 7
On July 1, 2005, Vail Corp. issued rights to stockholders to
subscribe to additional shares of its common stock. One right
was issued for each share owned. A stockholder could
purchase one additional share for 10 rights plus $15 cash. The
rights expired on September 30, 2005. On July 1, 2005, the
market price of a share with the right attached was $40, while
the market price of one right alone was $2. Vail's stockholders'