Financial Accounting The Cornerstone Of Business Decision Making 5th Edition Jay S Rich, Jeff Jones, Linda Ann Myers - Solutions

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INTEREST-BEARING BOND AT PAR WITH ANNUAL INTEREST PAYMENTS Kiwi Corporation issued at par $200,000, 8 percent bonds on December 31, 2008. Interest is paid annually on December
BOND PREMIUM AND DISCOUNT Markway, Inc., is contemplating selling bonds. The issue is to be composed of 150 bonds, each with a face amount of $2,000.Required:. Calculate how much Markway is able to borrow if each bond is sold at a premium of $20.. Calculate how much Markway is able to borrow if
ISSUING AT PAR, A PREMIUM, OR A DISCOUNT Kartel Company is planning to issue 500 bonds, each having a face amount of $1,000.Required:. Prepare the journal entry to record the sale of the bonds at par.. Prepare the journal entry to record the sale of the bonds at a premium of $34,000.. Prepare the
(APPENDIX) BOND ISSUE PRICE On December 31, 2009, Callahan Auto issued $1,500,000 of 8 percent, 10-year bonds.Interest is payable semiannually on June 30 and December 31.Required:What is the issue price if the bonds are sold to yield 6 percent (round to nearest dollar)?Exercises Exercise
(APPENDIX) BOND ISSUE PRICE On December 31, 2009, Garner Hot Rods issued $2,000,000 of 6 percent, 10-year bonds. Interest is payable semiannually on June 30 and December 31.Required:What is the issue price if the bonds are sold to yield 8 percent?Cornerstone Exercise
RATIO ANALYSIS Red Corporation had $2,000,000 in total liabilities and $3,500,000 in total assets as of December 31, 2009. Of Red’s total liabilities, $350,000 is long-term.Required:Calculate Red’s debt to assets ratio and its long-term debt to equity ratio.Cornerstone Exercise
RATIO ANALYSIS Blue Corporation had $2,000,000 in total liabilities and $3,500,000 in total assets as of December 31, 2009.Required:Calculate Blue’s debt to equity ratio.Cornerstone Exercise
RATIO ANALYSIS Watterson Corporation’s balance sheet showed the following amounts: Current Liabilities, $70,000; Bonds Payable, $150,000; and Lease Obligations, $20,000. Total stockholders’ equity was $90,000.Required:Calculate the debt-to-equity ratio.Cornerstone Exercise
Provide the journal entry to record the acquisition.Cornerstone Exercise
Would Southern Aircraft record the lease as an operating or capital lease? Why?
LEASES Southern Airlines has leased an aircraft from BAL Aircraft Company. The annual payments are $1,000,000, and the life of the lease is 18 years. It is estimated that the useful life of the aircraft is 20 years. The present value of the future lease payments is$8,755,630.Required:
COST OF DEBT FINANCING Diamond Company’s cost of debt financing is 9.5 percent. Its tax rate is 35 percent.Diamond has $2,000,000 of debt.Required:. Calculate the after-tax cost amount of interest expense.. How does the tax effect of interest expense affect financial leverage?Cornerstone Exercise
COST OF DEBT FINANCING Barney Corporation’s cost of debt financing is 8.5 percent. Its tax rate is 35 percent.Required:Calculate the after-tax interest rate to three decimal places.Cornerstone Exercise
INSTALLMENT NOTE ABC bank loans $250,000 to Yossarian to purchase a new home. Yossarian will repay the note in equal monthly payments over a period of 30 years. The interest rate is 12 percent.Required:If the monthly payment is $2,571.53, how much of the first payment is interest expense and how
INSTALLMENT NOTES Use the information from Cornerstone Exercise 9-44.Required:Record the journal entries for March 31, and April 30, 2010.Cornerstone Exercise
INSTALLMENT NOTES Thornwood Lanes bought a service vehicle for $25,000 by issuing a 6 percent installment note on December 31, 2009. Thornwood will make 12 monthly payments of$2,151.66 at the end of each month.Required:Prepare the amortization table using the effective interest rate
BONDS ISSUED AT A PREMIUM (EFFECTIVE INTEREST)Use the information from Cornerstone Exercise 9-42.Required:Record the journal entries for December 31, 2010 and 2011.Cornerstone Exercise
BONDS ISSUED AT A PREMIUM (EFFECTIVE INTEREST)Charger Battery issued $100,000 of 11 percent, seven-year bonds on December 31, 2008, for $104,868. Interest is paid annually on December
BONDS ISSUED AT A PREMIUM (EFFECTIVE INTEREST)Use the information from Cornerstone Exercise 9-40.Required:Record the journal entries for December 31, 2010 and 2011.Cornerstone Exercise
The market rate of interest is 4 percent.Required:Prepare the amortization table using the effective interest rate method.Cornerstone Exercise
BONDS ISSUED AT A PREMIUM (EFFECTIVE INTEREST)Cookie Dough Corporation issued $500,000 in 6 percent, 10-year bonds (payable on December 31, 2018) on December 31, 2008, for $581,757. Interest is paid on June 30 and December
BONDS ISSUED AT A DISCOUNT (EFFECTIVE INTEREST)Use the information from Cornerstone Exercise 9-38.Required:Record the journal entry for December 31, 2009 and 2010.Cornerstone Exercise
The market rate of interest is 11 percent.Required:Prepare the amortization table using the effective interest rate method.Cornerstone Exercise
BONDS ISSUED AT A DISCOUNT (EFFECTIVE INTEREST)Crafty Corporation issued $650,000 of 10 percent, seven-year bonds on December 31, 2008, for $619,371. Interest is paid annually on December
BONDS ISSUED AT A DISCOUNT (EFFECTIVE INTEREST)Use the information from Cornerstone Exercise 9-36.Required:Record the journal entries for December 31, 2010 and 2011.Cornerstone Exercise
The market rate of interest is 10 percent.Required:Prepare the amortization table using the effective interest rate method.Cornerstone Exercise
BONDS ISSUED AT A DISCOUNT (EFFECTIVE INTEREST)Sicily Corporation issued $300,000 in 8 percent bonds (payable on December 31, 2018) on December 31, 2008, for $262,613. Interest is paid on June 30 and December
DEBT ISSUED AT A PREMIUM (STRAIGHT LINE)Use the information from Cornerstone Exercise 9-34.Required:Prepare the amortization table for Ironman Steel’s bonds.Cornerstone Exercise
DEBT ISSUED AT A PREMIUM (STRAIGHT LINE)On December 31, 2008, Ironman Steel issued $500,000, eight-year bonds for$508,000. The stated rate of interest was 9 percent and interest is paid annually on December 31.Required:Provide the necessary journal entry on December 31, 2012, assuming the
DEBT ISSUED AT A DISCOUNT (STRAIGHT LINE)Use the information from Cornerstone Exercise 9-32.Required:Prepare the amortization table for Drew Company’s bonds.Cornerstone Exercise
DEBT ISSUED AT A DISCOUNT (STRAIGHT LINE)On December 31, 2007, Drew Company issued $170,000, five-year bonds for$155,000. The stated rate of interest was 6 percent and interest is paid annually on December 31.Required:Provide the necessary journal entry on December 31, 2009, assuming the
ZERO COUPON BONDS (STRAIGHT LINE)Dean Plumbing issues $1,000,000 face value, noninterest-bearing bonds on December 31, 2009. The bonds are issued at 65 and mature on December 31, 2013.Required:Assuming the straight-line amortization method is followed, provide the journal entry on December 31,
DEBT ISSUED AT PAR On December 31, 2008, Brock & Co. issued $250,000 of bonds payable at par. The bonds have a 10 percent stated rate, pay interest on June 30 and December 31, and mature on December 31, 2011.Required:Provide the journal entries to record the interest payment on June 30,
ISSUANCE OF LONG-TERM DEBT M. Nickles Company issued $500,000 of bonds for $498,351. Interest is paid semiannually.Required:a. Provide the necessary journal entry to record the issuance of the bonds.b. Is the yield greater or less than the stated rate? How do you know?Cornerstone Exercise
ISSUANCE OF LONG-TERM DEBT EWO Enterprises issues $200,000 of bonds payable.Required:Provide the necessary journal entry to record the issuance of the bonds assuming:a. The bonds were issued at par.b. The bonds were issued at 102.c. The bonds were issued at 97.Cornerstone Exercise
ISSUANCE OF LONG-TERM DEBT Anne Corp. issued $400,000, 6 percent bonds.Required:Provide the necessary journal entry to record the issuance of these bonds assuming:a. The bonds were issued at par.b. The bonds were issued at 104.c. The bonds were issued at 99.Cornerstone Exercise
REPORTING LONG-TERM DEBT ON THE BALANCE SHEET Dennis Corp. has the following bonds:a. $100,000 bond that has $2,000 of unamortized discount associated with it.b. $100,000 bond that has $3,000 of unamortized premium associated with it.Required:Provide the balance sheet presentation for these two
(Appendix) The bond issue price is determined by calculating the:a. present value of the stream of interest payments and the future value of the maturity amount.b. future value of the stream of interest payments and the future value of the maturity amount.c. future value of the stream of interest
McLaughlin Corporation’s balance sheet showed the following amounts:Current Liabilities, $75,000; Total Liabilities, $100,000; Total Assets, $200,000.What is the debt to total assets ratio?a. 2b. 1c. 0.875d. 0.5
Kinsella Corporation’s balance sheet showed the following amounts: Current Liabilities, $75,000; Total Liabilities, $100,000; Total Assets, $200,000.What is the long-term debt to equity ratio?a. 0.75b. 0.375c. 0.25d. 0.125
Willow Corporation’s balance sheet showed the following amounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, 2,300. Total stockholders’ equity was $6,000. The debt-to-equity ratio is:a. 0.63.b. 0.83.c. 1.42.d. 1.47.
WVA Mining Company has leased a machine from Franklin Machinery Company. The annual payments are $6,000, and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would WVA Mining record the acquisition of the machine?a. The machine would be recorded
On January 2, 2007, Sylvester Metals Co. leased a mining machine from EDH Leasing Corp. The lease qualifies as an operating lease. The annual payments are $4,000 paid at the end of each year, and the life of the lease is 10 years. What entry would Sylvester Metals Co. make when the machine is
Which of the following lease conditions would result in a capital lease to the lessee?a. The lessee will return the property to the lessor at the end of the lease term.b. The lessee can purchase the property for $1 at the end of the lease term.c. The fair market value of the property at the
Which of the following statements regarding leases is false?a. Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash.b. Accounting recognizes two types of leases—operating and capital leases.c. If a lease is classified
Bonds are a popular source of financing because:a. bond interest expense is deductible for tax purposes, while dividends paid on stock are not.b. financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of stock.c. a company having cash flow problems
Serenity Company issued $100,000 of 6 percent, 10-year bonds when the market rate of interest was 5 percent. The proceeds from this bond issue were $107,732. Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annuallya. Interest
The result of using the effective interest method of amortization of the discount on bonds is that thea. interest expense for each amortization period is constant.b. a constant interest rate is charged against the debt carrying value.c. amount of interest expense decreases each period.d. cash
In 2008, Drew Company issued $200,000 of bonds for $189,640. If the stated rate of interest was 8 percent and the yield was 6.73 percent, how would Drew calculate the interest expense for the first year on the bonds using the effective interest method?a. $189,640 3 6.73%b. $189,640 3 8%c. $10,000 3
Installment bonds differ from typical bonds in what way?a. Essentially they are the same.b. Installment bonds do not have a stated rate.c. A portion of each installment bond payment pays down the principal balance.d. The entire principal balance is paid off at maturity for installment bonds.
When interest-bearing bonds are issued at a premium, the interest expense for the period isa. the amount of interest payment for the period plus the discount amortization for the period.b. the amount of interest payment for the period minus the discount amortization for the period.c. the amount of
When interest-bearing bonds are issued at a discount, the interest expense for the period isa. the amount of interest payment for the period plus the discount amortization for the period.b. the amount of interest payment for the period minus the discount amortization for the period.c. the amount of
When noninterest-bearing bonds are issued, the discount isa. disregarded for financial reporting purposes.b. expensed immediately.c. amortized to interest expense each period.d. credited to revenue.
Sean Corp. issued a $40,000, 10-year bond, with a stated rate of 8 percent, paid semiannually. How much cash will the bond investors receive at the end of the first interest period?a. $800b. $1,600c. $3,200d. $4,000
Bonds in the amount of $100,000 with a life of 10 years were issued by the Roundy Company. If the stated rate is 6 percent and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?a. $60,000b. $120,000c. $30,000d. $6,000
What entry would be made on December 31 when the interest is paid?(Numbers are omitted.)a. Interest Expense Cashb. Interest Expense Discount on Bonds Payable Cashc. Interest Expense Discount on Bonds Payable Cashd. Interest Expense Bonds Payable Cash
The Bower Company sold $100,000 of 20-year bonds for $95,000. The stated rate on the bonds was 7 percent, and interest is paid annually on December
When bonds are issued by a company, the accounting entry typically shows ana. increase in liabilities and a decrease in stockholders’ equity.b. increase in liabilities and an increase in stockholders’ equity.c. increase in assets and an increase in liabilities.d. increase in assets and an
The premium on bonds payable account is shown on the balance sheet asa. a contra asset.b. a reduction of an expense.c. an addition to a long-term liability.d. a subtraction from a long-term liability.
What best describes the discount on bonds payable account?a. An assetb. An expensec. A liabilityd. A contra liability
If bonds are issued at 101.25, this means thata. a $1,000 bond sold for $101.25.b. the bonds sold at a discount.c. a $1,000 bond sold for $1,012.50.d. the bond rate of interest is 10.13 percent of the market rate of interest.
Bonds are sold at a premium if thea. issuing company has a better reputation than other companies in the same business.b. market rate of interest was less than the stated rate at the time of issue.c. market rate of interest was more than the stated rate at the time of issue.d. company will have to
Which of the following statements regarding bonds payable is true?a. Generally, bonds are issued in denominations of $100.b. When an issuing company’s bonds are traded in the ‘‘secondary’’ market, the company will receive part of the proceeds when the bonds are sold from the first
Describe how the bond issue price is calculated.Multiple-Choice Exercises
Name and describe two kinds of leases.
How does a firm ‘‘leverage’’ its capital structure? When is leverage advantageous?When is it disadvantageous? Who receives the advantage or bears the disadvantage of leverage?
Under the effective interest rate method, describe the difference in calculating the(1) interest payment and (2) interest expense for the period.
How can there be interest expense each period for zero-coupon bonds if there are no interest payments?
What is the difference between the straight-line and effective interest rate methods of amortizing premiums and discounts?
How do premiums and discounts on long-term debt securities affect interest expense?
How are premiums and discounts presented on the balance sheet?
Describe how the relationship between the stated rate and yield rate affect the price at which bonds are sold.
Describe the process that businesses follow to sell new issues of long-term debt.
How is total interest for long-term debt calculated?
What is a junk bond?
What does it mean if a bond is ‘‘convertible’’?
What does it mean if a bond is ‘‘callable’’?
How does a secured bond differ from an unsecured bond?
How does a bond’s stated rate differ from its yield rate? Which one is used to calculate the interest payment?
What is the stated or coupon rate of a bond?
What is the maturity date of a bond?
What is long-term debt?
(Appendix 9A) Calculate the market price of long-term debt using present value techniques.
Analyze a company’s longterm solvency using information related to longterm liabilities.
Contrast the terms and the accounting for operating and capital leases.
Determine the after-tax cost of financing with debt and explain financial leverage.
Use the effective interest rate method to account for premium/discount amortization.
Use the straight-line method to account for premium/discount amortization.
Account for the issuance of long-term debt.
Describe debt securities and the markets in which they are issued.
The distance travelled (in miles) between recharges of JCY batteries used for electric cars, appears to depend on charging time and the speed at which the car is operated. A pilot study of the prototype JCY battery was carried out at three preset charging periods as well as three operating speeds.
In a 24 factorial design in A, B,C, and D, the blocks are defined as follows:Identify all the factorial effects that are aliased with blocks.Analyze the data and comment on the effectiveness of blocking. Block I Block II Block III Block IV (1) ab cd abcd a b acd bcd C abc d abd ac bc ad bd
The experiment designed in Exercise 9.6 was run in two replicates, and the following responses were obtained:Write a SAS program to analyze the responses and reach conclusions. Was blocking effective? Block I Block II (1) 74 a 110.8 ab 100.8 Replicate I cd 100.0 b 88.8 acd 137.6 Block III 78.4 abc
In an industrial experiment, the yield of the process was studied under seven different levels of reactant concentrations. However, only four of the processes can be run in a day so a symmetric BIBD with four replicates was used. The table below shows the responses in percentage yields of the
An experiment was performed to compare five treatments. Since only four of these could be accomplished in a day, 5 days were used, leading to a BIBD.The responses of the experiments are as follows:Analyze the results of this experiment and compare the treatment effects.What is the value of λ for
For the experiment of Exercise 7.1, obtain a regression model for the responses using reference cell coding to define the indicator variables in the model, with cell (2, 2, 2) as the reference cell. Fit the model and extract the fitted values and residuals. Perform ANOVA and test for significance
For the experiment of Exercise 7.1, obtain a regression model for the responses using effects coding method to define the indicator variables in the model. Fit the model, extract the fitted values and residuals. Perform ANOVA and test for significance of the fitted model.
Suppose that in an experiment involving three factors, A, B, and C, set at two levels, the following data were obtained:Obtain a regression model for the responses using reference cell coding to define the indicator variables in the model. Fit the model and extract the fitted values and residuals.
For the experiment of Exercise 8.3, obtain a regression model for the responses using effects coding method to define the indicator variables in the model. Fit the model and extract the fitted values and residuals. Perform ANOVA and test for significance of the fitted model.
To study the effects of four factors A, B, C, and D on a process, a 24 factorial experiment was run in two replicates and the responses are as follows:Write a SAS program to analyze the responses of the experiment by using cell (2, 2, 2, 2) as the reference cell for the regression model. Identify

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Financial Accounting The Cornerstone Of Business Decision Making 5th Edition Jay S Rich, Jeff Jones, Linda Ann Myers - Solutions

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