How should these amounts be treated for accounting purposes

Assignment Help Financial Management

Reference no: EM132006035

1) On January 1, Marigold Corp. issued $6600000, 9% bonds for $7029000. The market rate of interest for these bonds is 8%. Interest is payable annually on December 31. Marigold uses the effective-interest method of amortizing bond premium. At the end of the first year, Marigold should report unamortized bond premium of:

$397320

$398580

$375320

$297000

2) A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $1420000. To extinguish this debt, the company had to pay a call premium of $530000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes?

Amortize $1950000 over four years.

Charge $1950000 to a loss in the year of extinguishment.

Charge $530000 to a loss in the year of extinguishment and amortize $1420000 over four years.

Either amortize $890000 over four years or charge $890000 to a loss immediately, whichever management selects.

3) A company issues $25200000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24701220. What is interest expense for 2018, using straight-line amortization?

$1941058

$1977288

$1990539

$1965600

4) A company issues $14900000, 5.8%, 20-year bonds to yield 6% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14555590. What is interest expense for 2018, using straight-line amortization?

$864200

$873470

$881421

$1236784

5) On January 1, 2018, Bonita Industries sold property to Carla Vista Company. There was no established exchange price for the property, and Carla Vista gave Bonita a $5900000 zero-interest-bearing note payable in 5 equal annual installments of $1180000, with the first payment due December 31, 2018. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $4589846 at January 1, 2018. What should be the balance of the Discount on Notes Payable account on the books of Carla Vista at December 31, 2018 after adjusting entries are made, assuming that the effective-interest method is used?

$935153.

$0.

$897068.

$1310154.

Reference no: EM132006035

Questions Cloud

At that time you expect the discount rate on similar bonds : At that time you expect the discount rate on similar bonds with similar risk to be 8%. If you’re correct, the yield over the 5-year period would be:

How much will he owe at the end of two years : How much will he owe at the end of two years? How much of his balance at the end of two years represents unpaid interest?

Calculate the interest paid on the mortgage : When he filed his taxes for 2016, he needed to calculate the interest paid on the mortgage.

What would be the expected rate of return on that portfolio : What would be the expected rate of return on that portfolio?

How should these amounts be treated for accounting purposes : Ignoring income tax considerations, how should these amounts be treated for accounting purposes?

The fixed side of fixed for floating swap for company loan : What is a fair interest rate (annualized) for the fixed side of a fixed for floating swap for Company X's loan?

On the basis of annual equivalent analysis : Magna is considering one of two forklift trucks for its assembly plant. Truck A costs $16,000 and requires $4,000 annually in operating expenses.

Businesses could freely engage in insider trading : What would happen to the U.S. economy if CEO's of major corporations or businesses could freely engage in insider trading?

One feature that mutual funds and exchange traded funds : One feature that mutual funds and exchange traded funds have in common is

User Account

All Pages