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Activity 1

# Activity 1 - In-Class Activity#1(30 points List the two...

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In-Class Activity #1 (30 points) List the two members of today’s activity _________________________________ _________________________________ Question 1 – Present values (10 points) A \$100,000 bond is issued on January 1, 2007 (face value=100,000) that is due on January 1, 2012, with coupon payments of \$6,000 each July 1 and January 1. Investors require an annual effective interest rate of 10 percent (5% for each 6-month period). What is the present value of the bond on January 1, 2007? PV \$ 107,721 Coupon pmt 6000.00 Face Value 100000.00 n 10.00 i 0.05 lump sum multiplier 0.61391 annuity multiplier 7.72173 Question 2 – (8 points) On April 1, the corporation borrowed \$65,000 from the bank by signing a \$70,000 zero-interest bearing note due one year from April 1. The company’s fiscal year end is December 31. Assume straight-line amortization of discount. Prepare the entry on April 1 and the adjusting entry on December 31. Cash 65,000 Discount on NP 5,000 Notes payable 70,000 Interest Expense 3,750=5000*9/12 Discount on NP 3,750

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Question 3 – (12 points) Below is a partial list of employees and their payroll data for August. Employee Earnings to July 31 Weekly Pay Mark Hamill \$ 4,200 \$ 150 Carrie Fisher \$ 5,600 \$ 200 Harrison Ford \$ 42,000 \$ 1,500 Alec Guinness \$ 112,000 \$ 4,000 Assume: Federal income tax withheld is 12% of wages. Union Dues withheld are 3% of wages. The state unemployment tax rate is 2% and the federal is 0.8%, both on a \$7,000 maximum. The FICA rate is 7.65% on employee and employer on a maximum of \$90,000 per employee. In
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