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# Jordan issued \$400,000, 10-year, 9% bonds to yield 11%. Interest is payable annually.

1. Jordan issued \$400,000, 10-year, 9% bonds to yield 11%. Interest is payable annually. Using factors from the present value tables in Appendix I near the end of your text, the journal entry to record the issuance of these bonds would be which of the following? (Points: 5) 2. Concord Inc. issues (sells) \$100,000 of its 10-year, 8% bonds to yield 10% on January 1, Year 1. The bonds pay interest annually on December 31. The bonds were sold with a discount of \$12,289. What is the bond carrying amount (book value) at the end of Year 1? (Points: 5) \$88,482 \$96,482 \$100,000 \$100,771 3. Concord Inc. issues (sells) \$100,000 of its 10-year, 8% bonds to yield 10% on January 1, Year 1. The bonds pay interest annually on December 31. The bonds were sold with a discount of \$12,289. What is the bond interest expense for Year 1? (Points: 5) \$8,000 \$8,771 \$10,000 \$10,771 4. Concord Inc. issues (sells) \$100,000 of its 10-year, 8% bonds to yield 10% on January 1, Year 1. The bonds pay interest annually on December 31. The bonds were sold with a discount of \$12,289. What is the amount of cash interest paid on the bonds in Year 1? (Points: 5) \$7,017 \$8,000 \$8,771 \$10,000 5. Concord Inc. issues (sells) \$100,000 of its 10-year, 8% bonds to yield 10% on January 1, Year 1. The bonds pay interest annually on December 31. The bonds were sold with a discount of \$12,289. What is the amount of bond discount amortization for Year 2? (Points: 5) \$848 \$1,229 \$1,540 \$2,000 6. Will Company issued \$100,000 worth of bonds on January 1, Year 3 with interest payable annually. The bonds had a contract rate of 8%. The bonds were set up as floating-rate debt with the rate benchmarked to LIBOR plus 3%. The entry to record the sale (issuance) of the bonds would be which one of the following? (Points: 5) 7. Will Company issued \$100,000 worth of bonds on January 1, Year 3 with interest payable annually. The bonds had a contract rate of 8%. The bonds were set up as floating-rate debt with the rate benchmarked to LIBOR plus 3%. What would interest expense for year one be if LIBOR is 5%? (Points: 5) \$3,000 \$5,000 \$8,000 \$9,000 8. Research on debt-for-equity swaps has shown that most of these swaps have resulted in an extinguishment gain. Therefore, some analysts have argued that debt-for-equity swaps have been undertaken to: (Points: 5) negatively alter capital structure. provide no alteration of capital structure. provide no real economic benefit. smooth transitory decreases in quarterly earnings. 9. Which one of the following contingencies must be accrued on the balance sheet? (Points: 5) The probable loss on a lawsuit that the firm's attorneys believe will be dropped The probable loss on a lawsuit that the firm's attorneys believe will be settled for \$90,000 The reasonably possible loss on a lawsuit that the firm's attorneys believe will be incurred, but the amount is unknown The reasonable possible loss on a lawsuit that the firm's attorneys believe will be settled for \$90,000 10. Hall, Inc. agrees to lease equipment from White Inc. for 10 years for \$50,000 at the end of each year. The equipment has a fair value of \$350,000 and an estimated useful life of 10 years. The lease includes a guaranteed residual value of \$20,000. In addition to the lease payments, Hall will pay \$10,000 per year for a maintenance agreement. Hall can finance this lease with its bank at a 12% rate. The lessor's implicit interest rate is 10%. Use the present value factors from Appendix I near the end of your text to perform any necessary present value calculations. The Hall lease is a(n): (Points: 5) capital lease because the lease term is more than 75% of the life of the asset. capital lease because the lease value is 90% of the fair value of the asset. operating lease because the lease value is less than 90% of the fair value of the asset. operating lease because the asset reverts to White at the end of the lease. 11. Hall, Inc. agrees to lease equipment from White Inc. for 10 years for \$50,000 at the end of each year. The equipment has a fair value of \$350,000 and an estimated useful life of 10 years. The lease includes a guaranteed residual value of \$20,000. In addition to the lease payments, Hall will pay \$10,000 per year for a maintenance agreement. Hall can finance this lease with its bank at a 12% rate. The lessor's implicit interest rate is 10%. Use the present value factors from Appendix I near the end of your text to perform any necessary present value calculations. What is the entry to record this lease on Hall's books? (Points: 5) 12. Hall, Inc. agrees to lease equipment from White Inc. for 10 years for \$50,000 at the end of each year. The equipment has a fair value of \$350,000 and an estimated useful life of 10 years. The lease includes a guaranteed residual value of \$20,000. In addition to the lease payments, Hall will pay \$10,000 per year for a maintenance agreement. Hall can finance this lease with its bank at a 12% rate. The lessor's implicit interest rate is
Edit Price

1)
B)
Present Value of Face Value = 400,000 *.35218 =\$140,872
+Present Value of Interest
=36,000 *5.88923 = \$212,012
\$352,884
Particulars
Amount \$
Cash
352,884
Bond Discount
47,116
Bonds...

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