|
none of these answers are correct.
2. Forrest Company issued $200,000 of 5-year bonds, with a stated rate of interest of 8%, payable semiannually. The market rate for such securities is 10%. How much did Forrest receive from the sale of these bonds? (Round to the nearest dollar.)
3. Knope Company has signed a capital lease contract for equipment that requires annual rental payments of $40,000 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to capitalize the leased equipment?
4. Robertson Company is considering an investment, which will return a lump sum of $700,000 four years from now. Below is some of the time value of money information that Robertson has compiled that might help in planning compound interest decisions.
|
Present Value of 1 for 4 periods at 10%
|
0.68301
|
|
Future Value of 1 for 4 periods at 10%
|
1.46410
|
|
Present Value of an Annuity of 1 for 4 periods at 10%
|
3.16986
|
|
Future Value of an Annuity of 1 for 4 periods at 10%
|
4.64100
|
To the closest dollar, what amount should Robertson Company pay for this investment to earn a 10% return?
5. Justine Company is considering purchasing machinery. The machinery will produce the following cash flows:
Year 1 $100,000
Year 2 $140,000
Justine requires a minimum rate of return of 12%. What is the maximum price Justine should pay for this machinery?
6. If a bond has a stated interest rate of 6%, but the market interest rate is 7%, the bond
7.
Presented below are long-term liability items for Lind Company at December 31, 2014.
|
Bonds payable, due 2016
|
|
$460,000
|
|
Lease liability
|
|
62,520
|
|
Notes payable, due 2019
|
|
72,720
|
|
Discount on bonds payable
|
|
36,800
|
Prepare the long-term liabilities section of the balance sheet for Lind Company.
8. What is the present value of $13,950 due 7 periods from now, discounted at 12%?
9. Presented below is the partial bond discount amortization schedule for Ferree Corp. Ferree uses the effective-interest method of amortization.
|
Semiannual Interest Periods
|
|
Interest to Be Paid
|
|
Interest Expense to Be Recorded
|
|
Discount Amortization
|
|
Unamortized Discount
|
|
Bond Carrying Value
|
|
Issue date
|
|
|
|
|
|
|
|
|
|
|
$84,240
|
|
|
$1,319,760
|
|
|
1
|
|
$63,180
|
|
|
$65,988
|
|
|
$2,808
|
|
|
81,432
|
|
|
1,322,568
|
|
|
2
|
|
63,180
|
|
|
66,128
|
|
|
2,948
|
|
|
78,484
|
|
|
1,325,516
|
|
(a) Prepare the journal entry to record the payment of interest and the discount amortization at the end of period
10. Sweetwood Company issues $4,200,000, 10-year, 12% bonds at 95, with interest payable on July 1 and January 1. The straight-line method is used to amortize bond discount.
Prepare the journal entry to record the sale of these bonds on January 1, 2014.
11. Golden Inc. issues $2,600,000, 5-year, 12% bonds at 104, with interest payable on July 1 and January 1. The straight-line method is used to amortize bond premium.
Prepare the journal entry to record the sale of these bonds on January 1, 2014.
|