problem1: Which of the following must be disclosed relative to long-term debt maturities & sinking fund requirements?
[A] The amount of scheduled interest payments on long-term debt during each of the next 5 years.
[B] The amount of future payments for sinking fund requirement & long-term debt maturities during each of the next 5 years.
[C] The present value of future payments for sinking fund requirements & long-term debt maturities during each of the next 5 years.
[D] The present value of scheduled interest payments on long-term debt during each of the next 5 years.
problem2: A company issues $20,000,000, 7.8%, 20-year bonds to yield 8 percent on January 1, 2007. Interest is paid on June 30 & December 31. The proceeds from the bonds are $19,604,145. Using effective-interest amortization, how much interest expense will be recognized in 2007?
[A] $1,568,498
[B] $1,568,332
[C] $780,000
[D] $1,560,000
problem3: On January 1, 2002, Pine Corp. issued 1,000 of its 10%, $1,000 bonds for $1,040,000. These bonds were to mature on January 1, 2012 but were callable at 101 any time after December 31, 2005. Interest was payable semiannually on July 1 & January 1. On July 1, 2007, Pine called all of the bonds & retired them. Bond premium was amortized on a straight-line basis. Before income taxes, Pine's gain or loss in 2007 on this early extinguishment of debt was
[A] $10,000 gain
[B] $8,000 gain
[C] $30,000 gain
[D] $12,000 gain
problem4: Limeway Company issues $5,000,000, 6 percent, five year bonds dated January 1, 2007 on January 1, 2007. The bonds pay interest semiannually on June 30 & December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
|
|
2.50%
|
3.00%
|
5.00%
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6.00%
|
|
Present value of a single sum for 5 periods
|
0.88385
|
0.86261
|
0.78353
|
0.74726
|
|
Present value of a single sum for 10 periods
|
0.7812
|
0.74409
|
0.61391
|
0.55839
|
|
Present value of an annuity for 5 periods
|
4.64583
|
4.57971
|
4.32948
|
4.21236
|
|
Present value of an annuity for 10 periods
|
8.75206
|
8.5302
|
7.72173
|
7.36009
|
[A] $5,218,809
[B] $5,217,308
[C] $5,000,000
[D] $5,216,494
problem5: The December 31, 2006, balance sheet of Eddy Corporation includes the following items:
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9% bonds payable due December 31, 2015
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$1,000,000
|
|
Unamortized premium on bonds payable
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27,000
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The bonds were issued on December 31, 2005, at 103, with interest payable on July 1 & December 31 of each year. Eddy uses straight-line amortization. On March 1, 2007, Eddy retired $400,000 of these bonds at 98 plus accrued interest. What should Eddy record as a gain on retirement of these bonds? Ignore all taxes.
[A] $18,600
[B] $20,000
[C] $18,800
[D] $10,800