E10-9Northeast Airlines is considering two alternatives for the financing of a p

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    E10-9Northeast Airlines is considering two
    alternatives for the financing of a purchase of afleet of airplanes.These two alternatives are:1.
    Issue 60000 shares of common
    stock at $45 per share. (Cash dividends have not been paid noris the payment of any contemplated.)2.
    Issue 10% 10-year bonds at
    par for $2700000.It is estimated that the company will earn $800000 before
    interest and taxes as a result of thispurchase.The company has an estimated tax rate of 30% and has
    90000 shares of common stockoutstanding prior to the new financing.InstructionsDetermine the effect on net income and earnings per share for
    these two methods of financing.E10-10On January 1 Neuer Company issued
    $500000 10% 10-year bonds at par. Interest ispayable semiannually on July 1 and January 1.InstructionsPresent journal entries to record the following.(a)
    The issuance of the bonds.(b)
    The payment of interest on
    July 1 assuming that interest was not accrued on June 30.(c)The accrual of interest on
    December 31E10-11On January 1 Flory Company issued
    $300000 8% 5-year bonds at face value.Interest is payable semiannually on July 1 and January 1.InstructionsPrepare journal entries to record the following events.(a)
    The issuance of the bonds.(b)
    The payment of interest on
    July 1 assuming no previous accrual of interest.(c)The accrual of interest on
    December 31.E10-15Leoni Co. receives $240000 when it issues
    a $240000 10% mortgage note payable tofinance the construction of a building at December 31 2011.
    The terms provide for semiannualinstallment payments of $20000 on June 30 and December 31.InstructionsPrepare
    the journal entries to record the mortgage loan and the first two installment
    payments.*E10-18Hrabik Corporation issued $600000 9%
    10-year bonds on January 1 2011 for$562613.This price resulted in an effective-interest rate of
    10% on the bonds. Interest is payablesemiannually on July 1 and January 1. Hrabik uses the
    effective-interest method to amortizebond premium or discount.InstructionsPrepare the journal entries to record the following. (Round to
    the nearest dollar.)(a)
    The issuance of the bonds.(b)
    The payment of interest and
    the discount amortization on July 1 2011 assuming that interestwas not accrued on June 30.(c)The accrual of interest and the
    discount amortization on December 31 2011.*P10-8ASoprano Electric sold $3000000 10% 10-year bonds on January
    1 2011. The bondswere
    dated January 1 and pay interest July 1 and January 1. Soprano Electric uses
    the straightlinemethod
    to amortize bond premium or discount. The bonds were sold at 104. Assume nointerest
    is accrued on June 30.Instructions(a)Prepare the journal entry to record the issuance of the bonds
    on January 1 2011.(b)Prepare a bond premium amortization schedule for the first 4
    interest periods.(c)Prepare the journal entries for interest and the amortization
    of the premium in 2011 and2012.(d)Show the balance sheet presentation of the bond liability at
    December 31 2012.

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