Determine the effect on net income and earnings per share

Assignment Help Accounting Basics
Reference no: EM131129811

Northeast Airlines is considering two alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are:

1. Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid nor is the payment of any contemplated).

2. Issue 10%, 10-year bonds at face value for $2,700,000.
It is estimated that the company will earn $800,000 before interest and taxes as a result of this purchase. The company has an estimated tax rate of 30% and has 90,000 shares of common stock outstanding prior to the newfinancing.

Instructions

Determine the effect on net income and earnings per share for these two methods of financing. 

Reference no: EM131129811

Questions Cloud

Prepare the journal entry to record the issuance of the bond : Prepare the journal entry to record the conversion of the bonds into 30,000 shares of $10 par value common stock. Assume the bonds were issued at par.
Prepare the journal entries to record the following events : The redemption of bonds at maturity, assuming interest for the last interest period has been paid and recorded.
Prepare journal entries to record the following events : On January 1, Flory Company issued $300,000, 8%, 5-year bonds at face value. Interest is payable semiannually on July 1 and January 1.
Interest is payable semiannually on july 1 and january 1 : The payment of interest on July 1, assuming that interest was not accrued on June 30.
Determine the effect on net income and earnings per share : Issue 60,000 shares of common stock at $45 per share. (Cash dividends have not been paid nor is the payment of any contemplated).
Find quantity of each chocolate bar you should manufacture : Find the quantity of each chocolate bar you should manufacture to maximize your daily profit. Write the inequalities to describe each objective and constraint.
Secured bonds have specific assets of the issuer pledged : When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result.
The human rights crises in iraq and syria : make a position paper - The topics are -THE HUMAN RIGHTS CRISES IN IRAQ AND SYRIA- THE IMPACT OF TERRORISM AND EXTREMIST THINKING ON THE RIGHTS OF WOMEN IN MIDDLE EAST
Prepare the entry to record the lease : James Morrison Corporation leases new equipment on December 31, 2010. The lease transfers ownership of the equipment to James Morrison at the end of the lease.

Reviews

Write a Review

Accounting Basics Questions & Answers

  What are the great approaches for cash management

What are the great approaches for cash management? If you are the controller who is in charge of managing cash, what methods would you take and why? 200-250 words please.

  How is tax basis calculated

What is the economic and tax policy rationale regarding corporate formation? When will a transfer be deemed a taxable event? How is basis determined? What if assets are contributed to a corporation by a non shareholder such as a government entity?

  Problem on early extinguishment of debt

Interest was payable semiannually on July 1 and January 1. On July 1, 2011, Goll called all of the bonds and retired them. Bond premium was amortized on a straight-line basis. Before income taxes, Goll's gain or loss in 2011 on this early extingui..

  Complete the requested calculation

Complete the requested calculation

  Interest is payable semi-annually

Interest is payable semi-annually

  Annual retainer paid to a video distributor

Classification at costs, merchandising sector Home Entertainment Center (HEC) operates a large store in San Francisco. The store has both a video section and a music section

  The following information is available for your first year

Receivables Management as the manager of the accounts receivable department for Beavis Leather Goods, Ltd., you recently noticed that Kelly Collins, your accounts receivable clerk who is paid $1,200 per month, has been wearing unusually tasteful and ..

  Floyd corporation had the following transactions pertaining

floyd corporation had the following transactions pertaining to debt investments. jan. 1 purchased 50 8 1700 petal co.

  Organizational culture of a firm

The organizational culture of a firm may present a strategic opportunity for the firm. The organizational culture includes the shared values about what is important and how things are done in the firm. It is the basic way that a firm interacts wit..

  On january 1 2013 the balance in smith cos allowance for

on january 1 2013 the balance in smith co.s allowance for bad debts account was 4860. during the year a total of 11950

  What are three scenarios that would result in detailed

in light of the full disclosure principle investors and creditors need to know the balance for assets liabilities and

  Sample journal transactions

What are some examples of basic entries to record transactions used in your organization? In your response, you are not required to journalize these entries.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd