Reference no: EM132504925

Question 1: Indigo Company is offered a contract whereby it will be paid $10,000 every six months for the next five years. The first payment will be received six months from today. What will the company be willing to pay for this contract if it expects a 16% annual return on the investment?

a) $ 49,114.50
b) $ 72,498.00
c) $ 67,101,00
d) $ 98,229.00
e) $ 59,890.50

Question 2: On June 30, 1993, the DEF Corporation sold bonds with a face value of $100,000. The contract rate of bond interest was 9% with interest payments on December 31 and June 30. the bonds mature in 10 years. When the bonds were sold, the market rate of bond interest was 12%. How much money did the DEF Corporation receive when it sold the bonds?

a) $119,252
b) $110,042
c) $100,000
d) $ 82,795

prepare the accounting entry for the interest payments on both December 31 1993 and June 30 1994

Question 3: The Kitchener Company issued bonds with a par value of $150 000 on their initial issue date. The bonds mature in 15 years and pay 8% annual interest in two semi-annual payments. On the issue date, the annual market rate of interest for the bonds was 10%.

a) What is the size of the semi-annual interet payment for these bonds?
b) How many semi-annual interest payments will be paid on these bonds over their life?
c) Were the bonds issued at par, at a discount, or at a premium?
d) Estimate the market value of the bonds as of the date they were issued?
e) Present the journal entry that would be made to record the bonds issuance and the first monthly interest payment.