acct 316- chapter14 quiz - On December 31, 2005, Reese Co....

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On December 31, 2005, Reese Co. is in financial difficulty and cannot pay a note due that day. It is a $600,000 note with $60,000 accrued interest payable to Trear, Inc. Trear agrees to accept from Reese equipment that has a fair value of $290,000, an original cost of $480,000, and accumulated depreciation of $230,000. Trear also forgives the accrued interest, extends the maturity date to December 31, 2008, reduces the face amount of the note to $250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. Reese should recognize a gain or loss on the transfer of the equipment of $0. $40,000 gain. $60,000 gain. $190,000 loss. Question 2 1 points Save A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2007. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,145. Using effective- interest amortization, how much interest expense will be recognized in 2007? $780,000 $1,560,000 $1,568,498 $1,568,332 Question 3 1 points S Limeway Company issues $5,000,000, 6%, 5-year bonds dated January 1, 2007 on January 1, 2007. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?
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This note was uploaded on 04/20/2009 for the course ACCT 10048 taught by Professor Brianw.leventhal during the Spring '09 term at University of Illinois at Urbana–Champaign.

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acct 316- chapter14 quiz - On December 31, 2005, Reese Co....

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