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Unformatted text preview: ACCT 301B Spring 2009 Midterm Answers A 1Given: Zero-interest-bearing note payable $400,000 Discount rate 9% Find: effective interest for 12 months Answer: Discount $36,000 Effective interest 9.89% 2Given: Estimated warranty cost percentage in year of sale 2% Estimated warranty cost percentage in year after sale 4% Estimated warranty cost percentage two years after sale 8% Sales 2006 $600,000 Sales 2007 $1,500,000 Sales 2008 $2,100,000 Sales total for three years $4,200,000 Actual warranty expenditures 2006 $9,000 Actual warranty expenditures 2007 $45,000 Actual warranty expenditures 2008 $135,000 Actual warranty expenditures total for three years $189,000 Find: warranty liability at December 31, 2008 Answer: Sum of percentages 14% Warranty liability $399,000 3Given: Bond principal $5,000,000 Stated interest rate 7.80% Priced to yield 8.00% Number of times per year interest paid 2 Proceeds received on the first day of the year $4,901,036 Find: using effective interest rate amortization, carrying value of bonds at end of first year...
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- Spring '11