Balzac issued $5,000,000 of 115 bonds on July 1, 2009, at 96 which yielded proceeds

jagguarpaw January 17, 2017 0 Comments

Question: Balzac issued $5,000,000 of 115 bonds on July 1, 2009, at 96 which yielded proceeds

Bonds payable – Balzac issued $5,000,000 of 115 bonds on July 1, 2009, at 96 which yielded proceeds of $4,800,000. The bonds will mature on July 1, 2019. Interest is paid semiannually on July 1 and January 1. Balzac uses the straight line method to amortize the bond discount.

Notes payable. Balzac has signed several long term notes with financial institutions and insurance companies. The maturities of these notes are given below. The total unpaid interest for all of these notes amount to $210,000 on March 31, 2015.

Due date                                                             Amount Due

April 1, 2015                                                        $ 200,000

July 1, 2015                                                         300,000

October 1, 2015                                                    150, 000

January 1, 2015                                                    150,000

March 31, 2017                                                     600,000

April 1, 2017 – march 31 2018                               500,000

April 1, 2018 – march 31, 2019                              700,000

April 1, 2019 – march 31, 2020                              400,000

April 1, 2020 – march 31, 2021                             500,000

$3,500,000

Estimate warranties – Balzac has a one-year product warranty on some selected items in its products line. The estimated warranty liability on sales made during the 2013-2014 fiscal year and still outstanding as of march 31, 2014 amounted to $84,000. The warranty costs on sales made from April 1, 2014 through March 31, 2015 are estimated at $210,000. The actual warranty costs incurred during the current 2014-15 fiscal year are as follows:

Warranty claims honored on 2013-14 sales                             $ 84,000

Warranty claims honored on 2014-15 sales                                95,000

Total warranty claims honored                                                  $179,000

Other information:

  1. Trade payables – accounts payable for supplies, goods and services amounted to $370,000 as of march 31, 2015.
  2. Payroll related items – outstanding obligations related to Balzac’s payroll as of March 31, 2015 are:

Accrued salaries and wages                                                         $ 150,000

FICA Taxes                                                                                   22,000

State & federal income tax withheld- employees                               25,000

Other payroll deductions                                                                  5,000

  1. Taxes – the following taxes incurred but not due until the next fiscal year are:

State and federal income taxes                                                 $310,000

Property taxes                                                                         125,000

Sales and use taxes                                                                 182, 00

  1. Miscellaneous Accruals – Other accruals not separately classified amount to $75,000 as of March 31, 2015 5 Dividends
  2. Dividends – On March 15. 2015, Balzac’s board of directors declared 4 cash dividend of $.40 per common share and a 10% common stock dividend. Both dividends were to be distributed on April 12, 2015, to the common stockholders of record at the close of business on March 31, 2015. Data regarding Balzac common stock are as follows:

Par value                                                                                             $per share

Number of shares issued and outstanding                           3,000,000 shares

Market values of common stock:                                              21.50 per share

April 12, 2015                                                                                     22.50 per share

Instructions’ Prepare the liabilities section of the balance sheet and appropriate notes to the statement for Balzac Inc as of March 31. 2015. As they should appear in its annual report to the stockholders. Write the entries which would be made over the life of the bonds and the dividend declarations. Include an analysis of the notes payable and warranty account