ORIE_350_homework__5_spring_2008

ORIE_350_homework__5_spring_2008 - ORIE 350 Homework#5...

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ORIE 350 Homework #5 Spring 2008 1. On January 1, 2001, Seton Corporation sold a $1,000,000 face value, 8 per cent face interest bond issue at a discount, and obtained 93.58% of face value. The bond pays interest on June 30 and December 31, commencing June 30, 2001. The bonds were dated January 1, 2001, and mature ten years from January 1, 2001. Seton’s fiscal year end is December 31. a) Provide the journal entry in proper form (include the date) to record the issuance of the bonds for Seton Corporation’s records. b) If the effective interest amortization method is used, provide the journal entry needed to record the periodic amortization and interest expense as well as the cash interest payment for this bond issue for Seton’s fiscal- year-end records on Dec. 31, 2001 c) Also provide the journal entry needed to record the periodic amortization and interest expense for June 30, 2002. 2. On October 1, 2003, PJ Walker takes out a mortgage to buy a new house. The financed amount is $140,000. He gets a 5.7% nominal annual interest loan for 15 years. The payments are due at the end of each month, beginning with Oct. 31, 2003.
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