plugin-A471f10 Practice Exam 3 Key

# plugin-A471f10 Practice Exam 3 Key - 1 ACCOUNTING 471...

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1 ACCOUNTING 471 PRACTICE EXAM #3 KEY FALL 2010 1. c. 4. d. 7. a. 10. b. 13. a. 16. d. 19. c. 2. d. 5. a. 8. b. 11. d. 14. d. 17. c. 20. a. 3. c. 6. d. 9. c. 12. d. 15. a. 18. c. Selected explanations and calculations : 2. Calculate the present values using the factor for 20 periods and 7%: (\$300,000 lump sum x .258) + (\$15,000 annuity x 10.594) = \$236,310 . 3. Annual coupon payment: \$120,000 x 4% = \$4,800. Total coupon payments: \$4,800/year x 3 years = \$14,400. Discount: \$120,000 x (100% - 96%) = \$4,800. Total interest expense = \$14,400 in coupon payments + \$4,800 discount = \$19,200 . 4. Amortization of discount of \$7,660 (i.e., \$49,200 - \$41,540) represents additional interest expense. Amortization of premium of \$2,310 (i.e., \$10,730 - \$8,420) represents a reduction in interest expense. Total interest expense = \$100,000 payments + \$7,660 - \$2,310 = \$105,350 . 5. Note: Semiannual coupon payment is \$2,000,000 x 12%/year x ½ year = \$120,000. Interest expense for first coupon payment on June 30, 2003 = \$2,216,560 x 10%/year x ½ year = \$110,828 . Thus, the

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## This note was uploaded on 01/26/2011 for the course ACCT 471 taught by Professor Jeffwilliams during the Fall '10 term at University of Michigan.

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plugin-A471f10 Practice Exam 3 Key - 1 ACCOUNTING 471...

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