Question $7$: Bonds Payable $(32$ marks$)$

On January $1^{st},2024,$ Martin's Magic issued their first bond. The bond will have a face value of $$1,000,000$

and semi$-$annual interest payments at an annual rate of $6\%.$ The bond would have a life of $4-$years.

Scenario $1$

a$)$ If the current market rate was $7\%,$ calculate the present value of this bond? $(4$ marks$)$

b$)$ Prepare the journal entry to record the issue of this bond on January $1^{st}.(2$ Marks$)$

c$)$ Prepare the journal entry to recognize the first interest payment on July $1^{st}.(4$ Marks$)$

d$)$ Prepare the journal entry to accrue interest at December $31$st$.(4$ marks$)$

e$)$ Prepare the journal entry to pay interest owing on January $1.(2$ marks$)$

Scenario $2$

Question $8$: Uncertain Liabilities $(11$ marks$)$

Martin's Magic gives out Magic Bux, which can be redeemed on future purchases from the store. $2\%$ of all

cash sales are given out in Magic Bux. Martin's Magic estimates that $90\%$ of all Magic Bux will be

redeemed in the future.

In May, J&J$\text{'}$s made a total of $$40,000$ in cash sales. Also, a total of $$1,000$ of Magic Bux were redeemed in May.

a$)$ Calculate the amount of Magic Bux that were given away in May. $(2$ Marks$)$

b$)$ Calculate the amount of Magic Bux from May that will be redeemed $($based on the estimate given$).(2$ Marks$)$

c$)$ Record the journal entry to recognize the Magic Bux that were earned in May. $(2$ Marks$)$

d$)$ Record the journal entry to recognize the Magic Bux that were redeemed in May. $(3$ Marks$)$ Question $9$: Installment notes payable $(10$ marks$)$

On January $1^{st},2024$ Martin's Magic is considering financing a new project by issuing a $5-$year promissory

note. The note would have a face value of $$20,000$ and an annual interest rate of $12\%.$ The company is

going to pay this note off making annual payments that will be blended payments of interest and principal

totalling $$5,548\mathrm{.}14.$

a$)$ Complete an amortization schedule if the company is going to pay this note off making annual

payments that will be blended payments of interest and principal totalling $$5,548.14.(5$ marks$)$

b$)$ Complete an amortization schedule if the company is going to pay this note off making annual

payments that will be fixed principal payments of $$4,000.(5$ marks$)(5$ Marks$)$

Question $10$: Cash Flow Statement $(20$ marks$)$

Martin's Magic wants to analyze how their biggest competitor Wizardly Wonders uses cash. They have

collected the following financial information:

Wizardly Wonders

Income Statement

For the year ended December $31,2023$Question $4$: Allowance for Doubtful Accounts $(10$ marks$)$

Martin's Magic takes in many sales on account. Throughout the year some of these accounts are collected while others are determined to be uncollectible. On May $31{?}^{st},2024$ a partial schedule of accounts receivable showed the following:

$\backslash$table$[[\backslash$table$[[$Number of Days$],[$Outstanding$]],\backslash$table$[[$Overdue A$/$R on May$],[31$ st$,2024]],\backslash$table$[[$Estimated $\%],[$Uncollectible$]],$Amount Uncollectible$],[0-30$ Days,$$20,000,1\%,],[31-60$ Days,$5,000,5\%,],[61-90$ Days,$4,000,20\%,],[$Over $90$ Days,$5,000,40\%,],[$Totals$,$$$34,000,,]]$

a$)$ Complete and total the schedule in the assignment paper. $(5$ Marks$)$

b$)$ The balance in the allowance for doubtful accounts before this estimate was a credit of $$1,300.$ Prepare the journal entry to recognize the estimate above. $(3$ marks$)$

c$)$ On June ${10}^{th},$ Martin's Magic determined a customer's account of $$600$ to be uncollectible. Prepare the entry to recognize the uncollectible account. $(2$ Marks$)$