Acc Quiz 5 - ACC 326 Spring 2006 Quiz # 4 3-23-2006 Name:...

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ACC 326 Name: KEY (25 points) Spring 2006 Quiz #4 Class Time: 3-23-2006 1. On January 2, 1999, Reno Corporation issues $1,500,000 of 10% bonds that are due December 31, 2008. The market rate for bonds of similar risk is 12% on January 2, 1999. Legal and other costs of $24,000 were incurred in connection with the issue. Interest on the bonds is payable annually each December 31. The $24,000 issue costs are being deferred and amortized on a straight-line basis over the 10-year term of the bonds. The bonds are callable at 101 (i.e. at 101% of face amount) and on January 2, 2004, Reno called $900,000 face amount of the bonds. Present value factors: PV of a single amount, n=10, I =12% = 0.32197 PV of an annuity, n= 10, I = 12% = 5.65022 Calculate the following amounts: a. The price of the bonds on January 2, 1999. (2points) PV of Principal, 1,500,000, n=10, i-12% 482,955 PV of annuity of 150,000, n=10, i=12% 847,533 Cash Proceeds or Price of bond 1,330,488 b. The net proceeds from the bond issue on January 2, 1999. (1point) Proceeds from bond issue – bond issue costs = 1,330488 – 24,000 = $1,306,488 c. Prepare a bond amortization table from January 2, 1999 to January 2, 2004 (assume the effective interest method). The amortization table should have
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Acc Quiz 5 - ACC 326 Spring 2006 Quiz # 4 3-23-2006 Name:...

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