issued $10,000 of 8%, 12 year bonds for
$9,632 cash. The bonds are dated January
1, 2002, and pay interest annually each
December 31. The market rate of interest
on the bonds is 8.5% on the issue date.
The cash paid for interest on December
31, 2002 would be:
5. An investor wishes to have $1,000
available in five years. How much should
be invested today, if the current interest
rate is 5 percent (round to the nearest
6. On January 1, 2002, Sawyer Company issued
$100,000 of its 10 year bonds payable to
generate cash for expansion. The bonds will
retire in 10 years, and have a stated rate of 5
percent. Interest will be paid annually each
December 31, starting December 31, 2002.
If Sawyer issued the bonds to yield an
effective (market) rate of 4 percent, what
amount of cash would Sawyer receive at issue
(round to nearest whole dollar)?
C. $ 67,560
D. $ 92,277
7. Turbo Distributors issued bonds with a
face value of $100,000 on January 1, 20X1
for $110,000. On December 31, 20x5, they
retired these bonds at 104. At that time,
the balance in the premium account was
$5,000. What is the gain or loss reported
on the retirement of the bonds?
A. $5,000 loss