Questions -
Q1. Shin Company has a loan agreement that provides it with cash today, and the company must pay $25,000 4 years from today. Shin agrees to a 6% interest rate. The present value factor for 4 periods, 6% is 0.7921. What is the amount of cash that Shin Company receives today?
Q2. Hornet Corporation has a loan agreement that provides it with cash today, and the company must pay $25,000 one year from today, $15,000 two years from today, and $5,000 three years from today. Hornet agrees to pay 10% interest. The following are factors from a present value table:
Period Interest Rate 10%
1 0.9091
2 0.8264
3 0.7513
What is the amount of cash that Hornet receives today?
Q3. On January 1, 2009, the Plimpton Corporation leased some equipment on a 2-year lease, paying $15,000 per year each December 31. The lease is considered to be an operating lease. Prepare the general journal entry to record the first lease payment on December 31, 2009.
Q4. Martin Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value on January 1, 2009. Interest is payable each June 30 and December 31.
(a) Prepare the general journal entry to record the issuance of the bonds on January 1, 2009.
(b) Prepare the general journal entry to record the first interest payment on June 30, 2009.
Q5. A company paid $500,000 for 12% bonds with a par value of $500,000. The bonds pay 6% interest semiannually on September 1 and March 1. The company intends to hold the bonds until they mature. Prepare the journal entries for the following dates and transactions related to this bond acquisition.
(1) Bonds purchased on September 1, 2009.
(2) Year-end adjusting entry, December 31, 2009.
(3) Receipt of semiannual interest March 1, 2010.
(4) Redemption of the bonds at maturity on August 31, 2019.
Q6. On April 1 of the current year, a company paid $150,000 to purchase 7%, 10-year bonds that had a par value of $150,000 and paid interest semiannually on October 1 and April 1. The company intends to hold the bonds until they mature. Prepare the journal entry to record the receipt of the semiannual interest payment on April 1 of the following year.
Q7. A company reported net income for 2009 of $98,000 and $106,000 in 2010. It also reported net sales of $735,000 in 2009 and $798,000 in 2010. The company's average total assets in 2009 were $1,850,000 and $1,720,000 in 2010. Calculate this company's profit margin, total asset turnover, and return on total assets for 2009 and 2010. Comment on the results.