Murphy Co. had 200,000 shares outstanding of $10 par
common stock on March 30 of the current year. Murphy
reacquired 30,000 of those shares at a cost of $15 per share and
recorded the transaction using the cost method on April 15.
Murphy reissued the 30,000 shares at $20 per 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