Quiz _2 - Winter 2009 - solutions

Quiz _2 - Winter 2009 - solutions - MGT201 Quiz #2...

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MGT201 Quiz #2 – Solutions Winter 2009 Part A ( 10 marks) 1-B 2-A 3-C 4-B 5-A 6-B 7-A 8-C 9-C 10-D Part B (10 marks) 1. Bank Loan— The bank loan would be considered long-term debt and recorded on the balance sheet at its full value. $80,000 payment required in the next year would be recorded as a current liability. Interest paid on the loan would be expensed as paid or accrued. 2. Bond Issue— The bond would be recorded on the financial statements at its face value plus any discount or less any premium. If similar bonds are providing a return of 8%, the 10% bond issue will sell at a premium. The $800,000 plus the premium will be recorded on the financial statements as long-term debt. The cash interest payments will be recorded partially as interest expense and partially as amortization of the premium. By the time the bonds are retired, the premium will be completely amortized and the bond will be carried on the balance sheet at $800,000 (just prior to retirement). 3.
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This note was uploaded on 12/21/2010 for the course MGT 201 taught by Professor Uppal during the Spring '09 term at University of Toronto- Toronto.

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Quiz _2 - Winter 2009 - solutions - MGT201 Quiz #2...

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