50.1K

Verified Solution

Link Copied!

PROBLEMS. Write your answer on a separate sheet of paper. SHOW ALL WORK. TO BE COMPLETED BY YOURSELI 1) Long-term debt financing involves borrowing money from a financial institution for a period of time that is greater than one year. In retun for borrowing the money, a company promises to pay back the principal along with interest. Loan payments are normally the same from period to period, however the portion of the payment that represents interest decreases with each payment. Explain why interest expenses decrease over the life of the long-term debt. How is interest expense normally calculated (formula)? Explain with an example. (5 points) 2) Use the information below to answer the following question Common stock, $1 par, 100,000 shares authorized, shares issued Additional paid-in capital Retained earnings Treasury stock (1,000 shares at cost) Total shareholders' equity 40,000 160,000 100,000 $294,000 How many shares of common stock are outstanding? (6 points) 3) Sundown Products had the following Stockholder's Equity section in its December 31, 2007 balance sheet Sundown Products Statement of Stockhol ders Equity As of December 31, 2007 Common Stock, $2 par value, 11,000 shares authorized Additional Paid h Capital Common Stock 8,468 21,170 Preferred Stock 5% cumulative, $25 par value, i 1,000 authorized Additional Paid In Capital Preferred Stock Treasury Stock, 1,236 shares Retained Earnings 11,250 1,350 (8,652) 48,854 Total Stockholders' EquityS 82,440 Required: (10 points) 1. How many shares of common stock are classified as issued? 2. How many shares of common stock are classified as outstanding? 3. How many shares of preferred stock are outstanding? 4. What was the average selling price of a share of common stock? 5. If $7,500 worth of dividends were declared and paid, how much would go to the preferred stockholders and how much would go to the common stockholders? 6. If $7,500 worth of dividends was declared and $3,000 in preferred dividends was in arrears, how much of the dividend would go to the common shareholder

Answer & Explanation Solved by verified expert

See Answer