Golden inc issues 2600000 5-year 12 bonds at 104 with

Reference no: EM13573963

1. When determining the proceeds received when issuing a bond, the factor applied to the amount of the bond principal is determined from the table for the

present value of 1.

present value of annuity of 1.

future value of 1.

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

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.

Reference no: EM13573963

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