Mgmt 200 Assignment Soln 4-2-10

Mgmt 200 Assignment Soln 4-2-10 - $ 437,740 Exercise 10-16...

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Management 200 – Introductory Financial Accounting– Spring 2010 Krannert School of Management - Purdue University Solutions to class assignment for April 2, 2010 Exercise 10-2 Issue Price 1. a. $500,000 b. $500,000 c. $500,000 2. a. $500,000 X 8% X 1/2 year = $20,000 b. $500,000 X 8% X 1/2 year = $20,000 c. $500,000 X 8% X 1/2 year = $20,000 3. a. $ 20,000 X 13.590 (Table 9-4, n = 20, i = 4%) = $ 271,800 $ 500,000 X .456 (Table 9-2, n = 20, i = 4%) = 228,000 Issue price $ 499,800 * *Should equal $500,000; the difference is due to rounding in present value factors. b. $ 20,000 X 14.877 (Table 9-4, n = 20, i = 3%) = $ 297,540 $ 500,000 X .554 (Table 9-2, n = 20, i = 3%) = 277,000 Issue price $ 574,540 c. $ 20,000 X 12.462 (Table 9-4, n = 20, i = 5%) = $ 249,240 $ 500,000 X .377 (Table 9-2, n = 20, i = 5%) = 188,500 Issue price
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Unformatted text preview: $ 437,740 Exercise 10-16 Impact Of A Discount 1. 2008 Jan. 1 Cash 91,526 Discount on Bonds Payable 8,474 Bonds Payable 100,000 To record issuance of bond. Bonds payable $ 100,000 Less: Discount on bonds payable 8,474 $ 91,526 2. 2008 Dec. 31 Interest Expense 9,153* Cash (100,000 x 9%) 9,000 Discount on Bonds Payable 153 To record payment of interest and amortization of discount. *($91,526 x 10% x 1) = $9,153. Bonds payable $ 100,000 Less: Discount on bonds payable 8,321 * $ 91,679 *8,474 153 = 8,321. 3. The market rate of interest was greater than the interest rate that Berol Corporation is paying. Therefore, the issuance price, discounted at 10%, the market rate, will be less than face value....
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This note was uploaded on 05/25/2010 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue University-West Lafayette.

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Mgmt 200 Assignment Soln 4-2-10 - $ 437,740 Exercise 10-16...

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