1)On January 1, 2013, Crystal Corporation is planning to issue $10,000 of 5%, 5-
ID: 2500209 • Letter: 1
Question
1)On January 1, 2013, Crystal Corporation is planning to issue $10,000 of 5%, 5-year bonds. Interest will be paid at the end of each year. Assuming that the current market rate of interest for companies with comparable risk is 6%, at what price will the bonds be issued? Use the tables in the back of your book. A) $9,578.76 B) $9,846.54 C) $10,000.00 D) $13,382.26
2) Knott Company uses the effective interest method of amortization. Knott issues a $1,000 bond on 1/1/13. The bond has a stated rate of interest of 5% and a term of 5 years. The market rate of interest on the date of issue is 4%. At what price will Knott issue the bond on 1/1/13? A) $ 821.93 B) $ 988.16 C) $1,222.59 D) $1,044.52
3) Knott Company uses the effective interest method of amortization. Knott issues a $1,000 bond on 1/1/13. The bond has a stated rate of interest of 5% and a term of 5 years. The market rate of interest on the date of issue is 4%. What is the Cash Flow Statement affect of the bond issuance? A) Operating Activity Inflow B) Financing Activity Outflow C) Investing Activity Outflow D) Financing Activity
4)
Fig, Inc., purchased equipment at a cost of $84,000. The equipment has an estimated residual value of $12,000 and an estimated life of 8 years, or 10,000 hours of operation. The equipment was purchased on January 1, 2012. During the first year of operation, it was used for 1,500 hours. At the end of 8 years, Fig expects to replace this old equipment with a newer model at an estimated cost of $90,000. What amount will Fig report as depreciation expense over the 8 year life of the equipment?
12,000
72,000
84,000
Depends upon the depreciation method chosen
5)
HNE Inc., issued bonds for $104,000 on January 1, 2013. The bonds had a face value of $100,000 and paid interest annually at 9%. The market rate on the date of issue was 8%. The first interest payment is on December 31, 2013, and HNE, Inc. prepares annual financial statements at 12/31 each year. How much interest will the bondholders be paid on December 31, 2013?
8,000
8,320
9,000
9,360
1.12,000
2.72,000
3.84,000
4.Depends upon the depreciation method chosen
Explanation / Answer
1) B) $9,846.54
2) D. $1044.52
3) D. Financing Activity
4) Depreciation of 1.$12000 per year as used 1500 hours in first year.
5) 3. $9,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.