FINANCIAL ACCOUNTING PRESENT VALUE PROBLEMS
Part 1:
PROBLEM #1
The Cavallaro Company issued a $20,000,000, 20-year bond on January 1st of last year. The bond was sold at 98. The stated rate is 6% (compounded semi-annually) while the market rate was 8%. On February 1st of this year, the company redeemed 55,000,000 worth of bonds at 99.
REQUIRED: Journalize the entries to 1) Issue the bonds on January 1st,
2) Record the first bond interest payment and bond amortization on July 1St,
3) Record the second bond interest payment and bond amortization on December 31st, and 4) redeem the bonds on February 1st.
PROBLEM #2
The Freimuth Company issued a $10,000,000, 20-year bond on January 1st of last year. The bond was sold at 106. The stated rate is 8% (compounded semi-annually) while the market rate was 6%. On April 1st of this year, the company redeemed 52,000,000 worth of bonds at 105.
REQUIRED: Journalize the entries to 1) issue the bonds on January 1st,
2) Record the first bond interest payment and bond amortization on July 1st
3) Record the second bond interest payment and bond amortization on December 31st, and 4) redeem the bonds on April 1st.
PROBLEM #3
The Poferl Company issued a $5,000,000, 20-year bond on January 1st of last year. The bond was sold at 108. The stated rate is 10% (compounded semi-annually) while the market rate was 7%. On March 1st of this year, the company redeemed $1,000,000 worth of bonds at 107,
REQUIRED: Journalize the entries to 1) issue the bonds on January 1st,
2) Record the first bond interest payment and bond amortization on July 1st,
3) Record the second bond interest payment and bond amortization on December 31st, and 4) redeem the bonds on March 1st.
PROBLEM #4
The Uran Company issued a $30,000,000, 10-year bond on January 1st of last year. The bond was sold at 109. The stated rate is 7% (compounded semi-annually) while the market rate was 6%. On May 1st of this year, the company redeemed $2,000,000 worth of bonds at 107.
REQUIRED: Journalize the entries to 1) issue the bonds on January 1St,
2) Record the first bond interest payment and bond amortization on July 1st,
3) Record the second bond interest payment and bond amortization on December 31st, and 4) redeem the bonds on May 1st.
Part 2:
1. The Kong Vang Corporation has purchased a coal mine for 6.3 million dollars. They minute total coal be mined will be 300,000 tons. When finished with the mine, they expect to sell it as a tunnal of love for $ 300,000.
During the first year, they mine 75.000 tons of coal. What is the amount of depletion?
2. The Maya Co. purchase a patent for $ 75,000. However, they have been offered $ 80,00 to sell it to their competitor, the Despen Company. They expect the patent to be useful for 5 years although the patent has 10 years before it expires.
What is the amount of amortization for the first year?
3. The Jasperson Company is selling their old truck for $6,000-They paid- $45,000 for it and have depreciated it $38,000 over its life. Journalize the sale.
4. A new buyer for the truck in Problem #4 has made an offer of $ 9,000 for our old truck. Journalize the sale of the truck to them.
5. Our owner has changed his mind again! Now he has decided to trade-in the old truck for a new truck. The new truck sells for $56,000. The track dealership has agreed to give us $5,000 for the old truck towards the purchase of the new truck. Journalize the trade-in on Jasperson's books.
6. The owner has managed to get the truck dealership to increase their offer on our old track. They now agree to give us $10,000 for the old truck towards the purchase of the new truck. Journalize the trade-in on Jasperson's books.
Attachment:- Rate_Tables.rar