Long-Term Liabilities and Stockholders’ Equity

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Exercise 1 

Intel Inc. is the pioneer in the manufacture of microprocessor for computers.   The company’s fiscal year runs from April1 to March 31.  On 1/1/2013, Intel Issued $5,000,000 of 11% Bonds due in 5 years.  The interest is payable annually on April 1.  The market rate of interest on that date for bonds of similar risk is 10% 

 

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Required: 

1. 1. 1. Prepare the journal entry for the issuance of the bonds and on the first interest payment date. 

2. 2. 2. Use the attached spreadsheet to prepare an amortization schedule for the bonds. 

 

Exercise 2 

Presented below is the stockholders equity section of Delta Inc.    

All amounts are in million except for number of shares and par value 

 

                                                                                                            Current Year   Prior Year 

Preferred Stock – 20,000,000 shares authorized,                                  $0                    $0 

none issued 

Common Stock – $1 par value, 750,000,000 shares                            182                  182 

authorized, 182,350,259 issued           

Additional Paid-in-capital                                                                  2,521               2,605 

Treasury stock at cost: current year – 21,194,312; prior  

Year 22,768, 027                                                                            (1,308)             (1,405) 

Accumulated other comprehensive loss                                              (664)                (785) 

Accumulated other deficit                                                                  (1,312)             (551) 

                                                                                                       ———-            ———-             

                                                                                                          (581)                46 

                                                                                                       ———-            ———- 

 

Required: 

1. 1. 1. Explain why the common stock is classified as part of the stockholder’s equity. 

2. 2. 2. Explain why treasury stock is not classified as an asset. 

3. 3. 3. Explain what is meant by “Accumulated other comprehensive loss.” 

4. 4. 4. Why is the accumulated deficit larger in the current year than in the prior year? 

5. 5. 5. Compute book value per share for Delta for the current year. 

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