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4.5 Analyze the equity section of the balance sheet

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On April 15, 2009, Melissa purchased $30,000 of Verbecke Co.'s 12%, 20-year bonds at face amount. Verbecke Co. has paid interest due on the bonds regularly. On April 15, 2013, market interest rates had risen to 14% and Melissa is considering selling the bonds.
a. Using the present value tables in Chapter 6 of the textbook, calculate the market value of Melissa's bonds on April 15, 2013.
b. How would any premium or discount be accounted for over the remaining term of the bonds?

Advanced Technologies balance sheet caption for common stock is:

Common stock, $10 par value, 7,000,000 shares authorized, 5,700,000 shares issued, 5,500,000 shares outstanding.

(a.) Calculate the dollar amount that will be presented opposite of this caption.
(b.) Calculate the total amount of a cash dividend of $1.00 per share.
(c.) What accounts for the difference between issued shares and outstanding shares?

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Solution Summary

A classic area for misunderstanding in accounting and finance! Comments are included with computations.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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