P14-2A Heathrow issues $2,000,000 of 6%, 15-year bonds dated January 1, 2004, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,728,224

P14-2A Heathrow issues $2,000,000 of 6%, 15-year bonds dated January 1, 2004, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,728,224

 

Straight-line amortization of both bond discount and bond premium Fundamental Accounting Principles, Seventeenth Edition 14. Long−Term Liabilities Heathrow issues $2,000,000 of 6%, 15-year bonds dated January 1, 2004, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,728,224.

 

Required

1. Prepare the January 1, 2004, journal entry to record the bonds’ issuance.

2. For each semiannual period, compute (a) the cash payment, (b) the straight-line discount amortization, and (c) the bond interest expense.

3. Determine the total bond interest expense to be recognized over the bonds’ life.

4. Prepare the first two years of an amortization table like Exhibit 14.7 using the straight-line method. 5. Prepare the journal entries to record the first two interest payments.

6. Assume that the bonds are issued at a price of $2,447,990. Repeat parts 1 through 5. Check (3) $2,071,776 (4) 12/31/2005 carrying value, $1,764,460

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10-2 The following are selected items from the accounting records of Seattle Chocolates for the year ended December 31, 2002

10-2 The following are selected items from the accounting records of Seattle Chocolates for the year ended December 31, 2002:

 

Note payable to northwest Bank $500,000 Income taxes payable 40,000 Accrued expenses and payroll taxes 60,000 Mortgage note payable 750,000 Accrued interest on mortgage note payable 5,000 Trade accounts payable 250,000 unearned revenue 15,000 Potential liability in pending lawsuit 100,000

 

Other information

1. The note payable to Northwest Bank is due in 60 days. Arrangement have been made to renew this note for an additional 12 months

2. The mortgage requires payments of $6,000 per month. An amortization table shows that its balance will be paid down to $739,000 by December 31, 2003.

3. Accrued interest on the mortgage note payable is paid monthly. The next payment is due near the end of the first week in January 2003.

4. Seattle Chocolates has been sued for $100,000 in a contract dispute. It is not possible at this time, however, to make a reasonable estimate of the possible loss, if any, that the company may have sustained.

 

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Fin 2030 Quantitative assignment week 2

Fin 2030 Quantitative assignment week 2

1. Future Value. What is the future value of
a. $773 invested for 14 years at 11 percent compounded annually?
b. $210 invested for 7 years at 6 percent compounded annually?
c. $650 invested for 10 years at 9 percent compounded annually?
d. $615 invested for 7 years at 14 percent compounded annually?
2. Present Value. What is the present value of
a. $803 to be received 10 years from now at a 15 percent discount rate?
b. $406 to be received 6 years from now at a 5 percent discount rate?
c. $300 to be received 10 years from now at a 9 percent discount rate?
d. $632 to be received 14 years from now at a 14 percent discount rate?

3. Future Value of an Annuity. What is the future value of
a. $557 a year for 14 years at 5 percent compounded annually?
b. $748 a year for 8 years at 10 percent compounded annually?
c. $442 a year for 8 years at 12 percent compounded annually?
d. $976 a year for 12 years at 5 percent compounded annually?

4. Present Value of an Annuity. What is the present value of
a. $1,163 a year for 15 years at an 8 percent discount rate?
b. $329 a year for 7 years at a 15 percent discount rate?
c. $365 a year for 10 years at a 10 percent discount rate?
d. $883 a year for 6 years at a 5 percent discount rate?

5. How many years will it take to grow
a. $711 to a value of 2,028.19 at a compound rate of 14 percent?
b. $321 to a value of 450.22 at a compound rate of 7 percent?
c. $931 to a value of 1,305.78 at a compound rate of 7 percent?
d. $1,191 to a value of 4,189.79 at a compound rate of 15 percent?

6. Interest Rate. At what interest rate will it take to grow
a. $759 to a value of 1,017.13 over 6 years?
b. $614 to a value of 1,082.08 over 5 years?
c. $701 to a value of 1,311.16 over 6 years?
d. $1,190 to a value of 4,163.16 over 12 years?

7. Annuity. How many years will it take for a payment of
a. $825 to grow to 17,642.03 at a compound rate of 10 percent?
b. $356 from a future value of 13,271.58 at a compound rate of 12 percent?
c. $1,098 from a future value of 6,189.53 at a compound rate of 6 percent?
d. $733 from a future value of 14,365.80 at a compound rate of 5 percent?

8. Annuity. At what interest rate will a payment of
a. $346 grow to 12,898.78 over a period of 15 years?
b. $1,056 grow to 10,834.35 over a period of 8 years?
c. $696 grow to 22,113.65 over a period of 15 years?

9. Car Loans (Hint: P/Y=12). How much is a car loan with a payment of
a. $257 per month for 3 years at 6% interest per year?
b. $437 per month for 5 years at 15% interest per year?
c. $274 per month for 6 years at 7% interest per year?
d. $253 per month for 2 years at 7% interest per year?
10. Car Loans (Hint: P/Y=12). How many months will you pay on a car loan of
a. $18,708 with a payment of 406.76 per month at 11% interest per year?
b. $10,112 with a payment of 276.33 per month at 14% interest per year?
c. $32,705 with a payment of 1,101.96 per month at 13% interest per year?
d. $34,136 with a payment of 1,638.97 per month at 14% interest per year?

11. Car Loans (Hint: P/Y=12). What is the interest rate on a loan of
a. $8,000 with a payment of 218.61 per month for 4 years?
b. $16,000 with a payment of 368.47 per month for 4 years?
c. $24,000 with a payment of 521.82 per month for 5 years?
d. $32,000 with a payment of 664.27 per month for 5 years?

12. Mortgages (Hint: P/Y=12, House cost = Loan Value/0.9).
What is the house cost on a 10 percent down mortgage with payments of
a. $4,369.66 per month for 30 years at 10 percent interest?
b. $1,626.83 per month for 15 years at 11 percent interest?
c. $3,724.21 per month for 30 years at 8 percent interest?
d. $4,469.19 per month for 15 years at 14 percent interest?

13. Mortgages (Hint: P/Y=12). What is the interest rate on a mortgage of
a. $863,001 with a payment of 5,174.13 for 30 years?
b. $125,709 with a payment of 1,275.02 for 15 years?
c. $546,227 with a payment of 6,906.73 for 30 years?
d. $478,167 with a payment of 3,781.31 for 15 years?

14. Mortgages (Hint: P/Y=12). What is the payoff on a 30 year, 6% mortgage of
a. $255,413 with a payment of 1,531.33 with 7 years remaining?
b. $530,493 with a payment of 3,180.57 with 9 years remaining?
c. $297,266 with a payment of 1,782.26 with 13 years remaining?
d. $108,947 with a payment of 653.19 with 13 years remaining?

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What is an auditor’s opinion?

What is an auditor’s opinion?

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P2 B - Indirect Method - For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.

P2 B — Indirect Method (3 POINTS)
For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
____    1.         Decrease in accounts payable during a period
____    2.         Declaration and payment of a cash dividend.
____    3.         Loss on sale of land.
            4.         Decrease in accounts receivable during a period.
____    5.         Redemption of bonds for cash.
____    6.         Proceeds from sale of equipment at book value.
____    7.         Issuance of common stock for cash.
____    8.         Purchase of a building for cash.
____    9.         Acquisition of land in exchange for common stock.
____    10.       Increase in merchandise inventory during a period.

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Fin 3403 Assignment 8

Fin 3403 Assignment 8

1. Bond price: Pierre Dupont just received a gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays annual coupons of 4.89 percent. If the current market rate is 8.40 percent, the maximum amount Pierre should be willing to pay for this bond is $

2. Zero coupon bonds: Northrop Real Estate Company is planning to fund a development project by issuing 10-year zero coupon bonds with a face value of $1,000. Assuming the appropriate discount rate is 15.79 percent and semiannual compounding, the price of these bonds is $

3. Zero coupon bonds: Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 10.48 percent, the value of these bonds are

4. Yield to maturity: Ruth Hornsby is looking to invest in a three-year bond that pays semiannual coupons at a coupon rate of 11.39 percent. If these bonds have a market price of $940.88, the yield to maturity is___% and the effective annual yield is___%

5. Zero coupon bonds: Diane Carter is interested in buying a five-year zero coupon bond whose face value is $1,000. She understands that the market interest rate for similar investments is 9.51 percent. Assuming annual compounding, the current price of this bond is $

6. Bond price: BA Corp is issuing a 10-year bond with a coupon rate of 6.71 percent. The interest rate for similar bonds is currently 4.83 percent. Assuming annual payments, value of the bond is $

7. Zero coupon bonds: Kintel, Inc., wants to raise $1 million by issuing six-year zero coupon bonds with a face value of $1,000. Their investment banker informs them that investors would use an 9.26 percent discount rate on such bonds. At this discount rate the bonds would sell for $ __ (*), and the firm would have to issue ____(**) shares in order to raise $1 million. Assume semi-annual compounding for payments.

(*)(Round your answer to 2 decimal places.)
(**)(Round your answer to 0 decimal places.)
(All intermittent calculations should be rounded to 4 decimal places before carrying to next calculation.)

8. Yield to maturity: Electrolex, Inc., has four-year bonds outstanding that pay a coupon rate of 11.61 percent semiannually. If these bonds are currently selling at $947.05, the yield to maturity that an investor can expect to earn on these bonds is ____% and the effective annual yield is ___%

9. Yield to maturity: Adrienne Dawson is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these bonds with a face value of $1,000 are currently selling at $615.05, the Effective Annual Yield on these bonds is ___%. (Assume that interest compounds semiannually on similar coupon-paying bonds.)

10. Bond price: The International Publishing Group is raising $10 million by issuing 15-year bonds with a coupon rate of 10.73 percent. Coupon payments will be annual. Investors buying the bond currently will earn a yield to maturity of 9.49 percent. The bonds would sell for $ ___ in the marketplace?

11. Bond price: Marshall Company is issuing eight-year bonds with a coupon rate of 6.16 percent and semiannual coupon payments. If the current market rate for similar bonds is 9.35 percent, the bonds will sell for $____(*). If the company wants to raise $1.25 million, the firm must sell ____(**) bonds.

(*)(Round your answer to 2 decimal places.)
(**)(Round your answer to 0 decimal places.)
(All intermittent calculations should be rounded to 4 decimal places before carrying to next calculation.)

12. Bond price: Rockne, Inc., has 15-year bonds that will mature in six years and pay an 8 percent coupon, interest being paid semiannually. If your required rate of return is 6.27 percent, the value of the bond today is $ ___. If you paid $1,053.61 you received a? Good, bad, or fail deal?

13. Bond price: Pullman Corp issued 10-year bonds four years ago with a coupon rate of 10.18 percent, paid semiannually. At the time of issue, the bonds sold at par. Today, bonds of similar risk and maturity will pay a coupon rate of 7.51 percent. The current market price of the firm's bonds is $ ____?

(Round your answer to 2 decimal places. All intermittent calculations should be rounded to 4 decimal places before carrying to next calculation.)

14.     Zero coupon bonds: Rockinghouse Corp. plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $369.37. Assuming annual coupon payments, the yield to maturity on these bonds is ___%?


TUTORIAL PREVIEW

Rate =	8.40%
Nper =	5
PMT = 1000 x 4.89% =	48.9
FV =	1000
PV =?

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Fin 500 Module 8 - A company issues 15-year, $1,000 par-value bonds,with a coupon rate of 5%. The bonds are sold for $619.70.

Fin 500 Module 8

Notes: This assignment is to be done individually.Show all calculations necessary and word-process your assignment. If afinancial calculator is used, define all inputs in addition to the output.

Problem 1

A company issues 15-year, $1,000 par-value bonds,with a coupon rate of 5%. The bonds are sold for $619.70. The tax rate is 30%.Compute the cost of debt before taxes and after taxes.

Problem 2

Suppose a company issues common stock to the public for $25 a share. The expected dividend is $2.50 per share and the growth in dividends is 8%. If the flotation cost is 10% of the issue proceeds, compute the cost of external equity, re.

Calculate the cost of preferred stock (rPS) with the given information:

Par Value = $200

Current Price = $208

Flotation Cost = $16

Annual Dividend = 12% of Par

Problem 4

A company is investigating the effect on its cost of capital with respect to the tax rate. Suppose there is a capital structure of 20% debt, 10% preferred stock, and 70% common stock. The cost of financing with retained earnings is re = 12%, the cost of preferred stock financing isr PS = 7%, and the before-tax cost of debt is rd = 9%. Calculate the weighted average cost of capital (WACC) given a tax rate of 35%.

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P2-2A Jane Kent is a licensed CPA. During the first month of operations of her business, Jane Kent, Inc., the following events and transactions occurred

P2-2A Jane Kent is a licensed CPA. During the first month of operations of her business, Jane Kent, Inc., the following events and transactions occurred.

Journalizing, Posting, and Preparing a Trial Balance

Complete P2-2A of Financial Accounting, using the templates in Appendix C for your answers. Each part of the problem corresponds to one tab in Appendix C. Complete all three tabs of Appendix C.

P2-2A Jane Kent is a licensed CPA. During the first month of operations of her business, Jane Kent, Inc., the following events and transactions occurred.

May 1 Stockholders invested $25,000 cash in exchange for common stock.

2 Hired a secretary-receptionist at a salary of $2,000 per month.

3 Purchased $2,500 of supplies on account from Read Supply Company.

7 Paid office rent of $900 cash for the month.

11 Completed a tax assignment and billed client $2,100 for services provided.

12 Received $3,500 advance on a management consulting engagement.

17 Received cash of $1,200 for services completed for H. Arnold Co

31 Paid secretary-receptionist $2,000 salary for the month.

31 Paid 40% of balance due Read Supply Company.

Jane uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 126 Supplies,No. 201 Accounts Payable,No. 205 Unearned Revenue,No. 311 Common Stock,No. 400 Service Revenue, No. 726 Salaries Expense, and No. 729 Rent Expense.

Appendix C

Journalizing, Posting, and Preparing a Trial Balance

 

Prepare a trial balance dated May 31, 2008 for Jane Kent, Inc. Debit and Credit totals are double- underlined. You can place summation formulas in F17 and G17 to compute debit and credit totals. Otherwise, you can compute totals using a calculator, then enter totals directly.

(APPENDIX C) SHOWN BELOW

JANE KENT, INC.

Trial Balance

31-May-08

DEBIT CREDIT

Cash Accounts Receivable Supplies Accounts Payable Unearned Revenue Common Stock Service Revenue Salaries Expense Rent Expense Totals

Write a message of 250 to 400 words in the body of your posting that justifies what you did in Appendix C. This message constitutes part d of the assignment. Address your message to your creditors and explain:

o The general goals of financial reporting

o The steps you took in the recording process

o How the steps you took support the principles of accounting

• Post your message and the completed Appendix C as an attachment.

 

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