AC221-Exam+III+A-fall2007_Solut

AC221-Exam+III+A-fall2007_Solut - Mid-Term Exam III (A)...

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Unformatted text preview: Mid-Term Exam III (A) Problem 1: Bonds (40 pts total) NO PARTIAL CREDIT GIVEN a. Calculate the cash proceeds from the issuance of the bond on January 1, 2004. (5 points) Coupon payment = 900*8%/2=36 PV of coupon payment = 36* PVA(3%,8) = 36*7.0197= 252.7. PV of principal payment = 900* PV(3%,8) = 900*0.7894 = 710.5. Price of the bond = 252.7+710.5 =963.2 b. Was the bond issued at Par, Premium or Discount? ______ Premium _______ (2 points) c. Prepare the journal entry to record the issuance of the bonds. (6 points) Dr. Cr. Cash 963.2 Bonds Payable 900 Premium on B/P 63.2 (= 963.2 - 900) d. Fill in the following amortization table. (6 points) Period ending on: Cash interest payment Interest expense Amortization discount/ (premium) Unamortized discount/ (premium) Net Book Value of Bond January 1, 2004 (63.2) 963.2 June 30, 2004 36 28.9 (7.1) (56.1) 956.1 December 31, 2004 36 28.7 (7.3) (48.8) 948.8 e. Prepare the long-term liability section of James Bond Corporation balance sheet on December 31, 2004, assuming that the bonds are the only long-term liability for the company. (5 pts) Bonds Payable 900 + Premium on B/P 48.8 Net Book Value of B/P 948.8 f. On January 1, 2005, the market interest rate went up to 10% and at that time James Bond Corporation bought back its f....
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AC221-Exam+III+A-fall2007_Solut - Mid-Term Exam III (A)...

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