1. Compute the debt to equity ratio for each of the following companies. Which company appears to have a riskier financing structure? Explain.
|
|
Canal Company |
Sears Comapany |
|
Total liabilities |
$492,000 |
$ 384,000 |
|
Total equity |
656,000 |
1,200,000 |
2. Kemper Company plans to issue 6% bonds on January 1, 2011, with a par value of $1,000,000. The company sells $900,000 of the bonds on January 1, 2011. The remaining $100,000 sells at par on March 1, 2011. The bonds pay interest semiannually as of June 30 and December 31. Record the entry for the March 1 cash sale of bonds.
3. Lauren Wright, an employee of ETrain.com, leases a car at O’Hare airport for a three day business trip.
The rental cost is $350. Prepare the entry by ETrain.com to record Lauren’s short term car lease cost.
4. Juicyfruit, Inc., signs a five year lease for office equipment with Office Solutions. The present value of the lease payments is $20,859. Prepare the journal entry that Juicyfruit records at the inception of this capital lease.