Review Ch 14 ACCT 373.pdf.doc

Review Ch 14 ACCT 373.pdf.doc - QAW 0,01% 1. On July :2007,...

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Unformatted text preview: QAW 0,01% 1. On July :2007, Pryce Co. issued 1,000 of its 10%, $1,000 bonds at 99 plus accrued iirit'erest. The bonds are dated 2007 and mature on April 1, 2017. interest is payable semiannually on April 1 and October 1. What amount did Pryce receive from the bond issuance? MW 1' - , r 3.3.; AQOQ/flfi} ‘3 51;,“ a. $1,015,000 Es 1,000,023.05. $1,000,000 ,, U f 0. $990,000 01901.9 Qatar's—w d. $965,000 01% 1,015 ,0 BO I [OJ-.000 fit" 6229 9.51% a ($1,000,000 x .99) + ($1,000,000 x .10 x 3/12) 2 $1 ,015,000. 2.. On July 1, 2005, Kitel, Inc. iSSue-di {bonds in the face amount of $5,000,000, (Wisgmature on July 1, 2015. Tfi'é..;ber‘ids were issued for $4,695,000 to yield ‘Ejpj/gagé’esuiting in a bond discount of $305,000. Kitei uses the effective—interest ‘i‘neth'od of amortizing bond discount. interest is payable annually on June 30. At ' June 30, 2007, Kitei's unamortized bond discount should be a. $264,050. ’1/ ,r/ a“? $990921 311;. 61,14? 8m b” D c. $244,000. . 0” as}; , , #50 @1950 q 75 5. Egg? d1. $215,000. *3. - 415920 L1 *1 , my 0a a 200520062 $4,595,000 + [($4,695,000 X ,1) -- ($5,000,000 x 09)] 395.003 1 10159 , a 731- : $4,714,500. 1.3”“ L' ' 2006-2007: $4,714,500 + ($471,450 -—- $450,000) = $4,735,950 “MAE $5,000,000 — $4,735,950 2 $264,050.. dishinfifi 3. On January 1, 2007, Nott Co. sold $1,000,000 of its 10% bonds for $885,296 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Nott report as interest expense for the six months ended June 30, 2007? ,m i a” $4 CMLA? Vmwiy. 'E:_,FI1:§;,J{9;LJ X b. $50,000 0. $53,118 d. $60,000 @5335ng _ 0 $885,296 x .06 = $53,118. 9999" 1 ; /,,«’/ 4 On January 1, 2007, Kite Co._ redeemed its 15-year bonds of $2,500,000 par 3,301 vaiue for 102. They were originally issued on January 1, 1995 at 98 with a i maturity date of January 1, 2010.. The bond issue costs relating to this NM mm. transaction were $150,000.. Kite *amortizes discounts, premiums, and bond issue 9139‘“ costs using the straight—line method. What amount of loss should Kite recognize on the redemption of these bonds (ignore taxes)? a. $90,000 , _ A 915 b. $60,000 95,0979/1’gfiwwj‘353 X "119”5 5 9.19,, 0.. $50,000 _,: , ' . r 1:: d” $0 /50,00@/{,515},€g,13:@2000 fl {:1 vgmi’S 2110,09 " ' .. 00 R .. $03?le 91009.. 9,500,001.23 K (“93* £7 55??©@' x~ 51,0430; '2”an figfia ‘ ON ‘ 4‘7 (1102‘ko 135933.591“ _ _ U ” 99,0199 \3 1L a ($2,500,000 x 1.02) — [$2,300,000 + (Agogofion = $90,000. 5. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years wilt be a. greater than if the straight-line method were used. b. greater than the amount of the interest payments. 0 the same as if the straight-line method were used. d. less than if the straight-line method were used 6. Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to a.. the stated (nominal) rate of interest multiplied by the face value of the bonds, b.. the market rate of interest multiplied by the face value of the bonds. 0.. the stated rate multiplied by the beginning-of-period carrying amount of the bonds. d. the market rate multiplied by the beginning-of—period carrying amount of the bonds. 7. The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as a.. an adjustment to the cost basis of the asset obtained by the debt issue. b.. an amount that should be considered a cash adjustment to the cost of any other debt issued over the remaining life of the old debt instrument. 0. an amount received or paid to obtain a new debt instrument and, as such, _ should be amortized over the life of the new debt. d. a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption. Use the following information for questions 8 through 10: On January 1, 2007, Bleeker 00. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%.. Table values are: - Present value of 1 for 8 periods at 6% .. .627 Present value of 1 for 8 periods at 8% .540 Present value of 1 for 16 periods at 3% . Present value of 1 for 16 periods at 4% . . Present value of annuity for 8 periods at 6%.. . 6210 Present value of annuity for 8 periods at 5747 Present value of annuity for 16 periods at .. .. 12.561 Present value of annuity for 16 periods at 4%.... 8. The present value of the principal is a. $534,000.. b. $540,000. C. $623,000. a 10. 11. 12 d , d $627,000 $1,000,000 X .534 = $534,000. The present value of the interest is a. $344,820. b. $349,560 0 $372,600 d. $376,830 ($1,000,000 x 03) x 11.652 = $349,560 30,000 The issue price of the bonds is a. $883,560. b. $884,820. c. $889,560. d. $999,600. $534,000 + $349,560 = $883,560 On January 1, 2007, Ann Rosen loaned $45,07_8__,to. doe Grant. A zero-interest- bearing note (face amount, $60,000) was‘e'xchian'QEd soleiy for cash; no other rights or privileges were, exchanged. The note is to be repaid on December 31, 2009. The prevailing'rate of interest for a loan of this type is 10%. The present value of $60,000 at 10% for three years is $45,078. What amount of interest income should Mszose'n recognize in 2007? a. $4,508. b. $6,000 0. $18,000. 01. $13,524. $45,078 x .10 = $4,508. Brye Co. is indebted to Dole under a $400,000, 12%, three-year note dated December 31, 2005. Because of Brye's financial difficulties developing in 2007, Brye owed accrued interest of $48,000 on the note at December 31, 2007. Under a troubled debt restructuring, on December 31, 2007, Dole agreed to settle the note and accrued interest for a tract of [and having a fair value of $360,000. Brye's acquisition cost of the land is $290,000. Ignoring income taxes, on its 2007 income statement Brye should report as a result of the troubled debt restructuring Gain on Disposal Restructuring Gain a. $158,000 $0 b $110,000 $0 0 $70,000 $40,000 d. $70,000 $88,000 $360,000 — $290,000 = $70,000 ($400,000 + $48,000) — $360,000 = $88,000. ...
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This note was uploaded on 03/28/2010 for the course ACCT 20719 taught by Professor Hall during the Spring '10 term at CSU San Bernardino.

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Review Ch 14 ACCT 373.pdf.doc - QAW 0,01% 1. On July :2007,...

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