South End is one of the world's most popular outdoor apparel companies. Assume that South End borrows $3.1 million from U. S. Bank and signs a note promising to pay back the $3.1 million in nine months, at which time South End also will pay any accrued interest. The interest rate on the note is 7%.

1. Prepare the journal entry South Col will record when it signs the note and receives the cash.

2. Prepare the journal entry that South Col will record when it pays off the note and any accrued interest after eight months

Which of the following statements is correct? stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. takeovers are most likely to be attempted if the target firm’s stock price is above its intrinsic value. one advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership.