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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%

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:

9% bonds payable due December 31, 2015 

$1,000,000

Unamortized premium on bonds payable  

27,000

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

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