Reference no: EM132009951

Question 1 - Calculate the total amount of interest expense over the life of the bonds for the following independent situations.

a) AED100,000 face value, 10%, 10-year bonds issued at 101.

b) AED240,000 face value, 5%, 5-year bonds issued at 100.

c) AED300,000 face value, 9%, 6-year bonds issued at 98.

Question 2 - ABC Corporation issued AED2,000,000 of 10%, 6-year bonds dated July 1, 2011, with semiannual interest payments . The bonds were issued on January 1, 2011, at 97. ABC's year-end is December 31.

a) Were the bonds issued at a premium, a discount, or at par?

b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?

c) If the company uses the straight-line method of amortization, what is the amount of interest expense ABC Corporation will show for the year ended December 31, 2011?

Question 3 - On the first day of the current fiscal year, AED2,000,000 of 10-year, 10% bonds, with interest payable annually, were sold for AED2,250,000. Present entries to record the following transactions for the current fiscal year:

(a) Issuance of the bonds.

(b) First annual interest payment.

(c) Amortization of bond premium for the year, using the straight-line method of amortization.

Question 4 - Future Sources, Inc. reported the following results for the year ending July 31, 2012:

Prepare a retained earnings statement for the fiscal year ended July 31, 2012.