1 - On January 1, a company issues 8%. 5 year, $300,000 bonds that pay interest semiannually. On the issue date, the annual market rate of interest is 6%.

The following information is taken from present value tables:

Present value of an annuity for 10 periods at 3% 8.5302

Present value of an annuity for 10 periods at 4% 8.1109

Present value of 1 due in 10 periods at 3% 0.7441

Present value of 1 due in 10 periods at 4% 0.6756

What is the issue (selling) price of the bond?

$420,000

$402,362

$300,010

$308,107

$325,592

2- The debt-to-equity ratio:

Is calculated by dividing book value of secured liabilities by book value of pledged assets.

Is a means of assessing the risk of a company's financing structure.

Is not relevant to secured creditors.

Can always be calculated from information provided in a company's income statement.

Must be calculated from the market values of assets and liabilities.

3 - On January 1 of 2015, Parson Freight Company issues 7%, 10-year bonds with a par value of $2,000,000. The bonds pay interest semi-annually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as:

Debit Cash $2,000,000; credit Bonds Payable $2,000,000.

Debit Cash $1,864,097; credit Bonds Payable $1,864,097.

Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903.

Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.

Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.