See attached

1. Notes payable - discount basis. On August 1, 2010, Colombo Co., treasurer signed a note promising to pay $240,000 on December 31, 2010. The proceeds of the note were $232,000. a. Calculate the discount rate used by the lender. b. Calculate the effective interest rate (APR) on the loan. c. Use the horizontal model (or write the journal entry) to show the effects of 1. Signing the note and the receipt of the cash proceeds on August 1, 2010. 2. Recording interest expense for the month of September. 3. Repaying the note on December 31, 2010. 2. Other accrued liabilities - warranties. Prist Co. had not provided a warranty on its products, but competitive pressures forced management to add this feature at the beginning of 2010. Based on analysis of customer complaints made over the past two years, the cost of a warranty program was estimated at 0.2% of sales. During 2010, sales totaled $4,600,000. Actual costs of servicing products under warranty totaled $12,700. a. Use the horizontal model (or a T-account of the Estimated Warranty Liability) to show the effect of having the warranty program during 2010. b. What type of accrual adjustment should be made at the end of 2020? c. Describe how the amount of the accrual adjustment could be determined. 3. Bonds payable - record issuance and discount amortization. Coley Co. issued $30 million face amount of 9%, 10-year bonds on June 1, 2010. The bonds pay interest on an annual basis on May 31 each year. a. Assume that the market interest rates were slightly higher than 9% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain. b. Independent of your answer to part a. assume that the proceeds were $29,640,000. Use the horizontal model (or write the journal entry) to show the effect of issuing the bonds. c. Calculate the interest expense that Coley Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2010, assuming that the discount of $360,000 is amortized on a straight-line basis. 4. Bonds payable - calculate market value. On March 1, 2005, Matt purchased $63,000 of Lawson Co.'s 8%, 20-year bonds at face value. Lawson Co. has paid the annual interest due on the bonds regularly. On March 1, 2010 market interest rates had risen to 12%, and Matt is considering selling the bonds. a. Using the present value, calculate the market value of matt's bonds on March 1, 2010. 5. Unearned revenues - subscription fees. Evans Ltd. publishes a monthly newsletter for retail marketing managers and requires its subscribers to pay $50 in advance for a oneyear subscription. During the month of September 2010, Evans Ltd. Sold 200 one-year subscriptions and received payments in advance from all new subscribers. Only 120 of the new subscribers paid their fees in time to receive the September newsletter; the other subscriptions began with the October newsletter. a. Use the horizontal model (or write the journal entries) to record the effects of the following items: 1. Subscription fees received in advance during September 2010. 2. Subscription revenue earned during September 2010. b. Calculate the amount of subscription revenue earned by Evans Ltd. during the year ended December 31, 2010, for these 200 subscriptions. Lifetime subscription offer (Note: this is an analytical assignment involving the use of present value tables and accounting estimates. Only the first sentence in No.5 applies to this continuation of the problem.) Evans, Ltd. is now considering the possibility of offering a lifetime membership option to its subscribers. Under this proposal, subscribers could receive the monthly newsletter throughout their lives by paying a flat fee of $600. The one-year subscription rate of $50 would continue to apply to new and existing subscribers who choose to subscribe on an annual basis. Assume that the average age of Evans Ltd.'s current subscribers is 38, and their average life expectancy is 78 years. Evans Ltd.'s average interest rate on long-term debt is 12%. c. Using the information given, determine whether it would be profitable for Evans Ltd. to sell lifetime subscriptions. (Hint: calculate the present value of a lifetime membership for an average subscriber using the appropriate present value table.) d. What additional factors should Evans Ltd. consider in determining whether to offer a lifetime membership option? Explain your answer as specifically as possible. 6. Bonds payable - callable. Riley Co. has outstanding $40 million face amount of 15% bonds that were issued on January 1, 1998, for $39,000,000. The 20-year bonds mature on December 31, 2017, and are callable at 102 (that is, they can be paid off at any time by paying the bondholders 102% of the face amount). a. Under what circumstances would Riley Co. managers consider calling the bonds? b. Assume that the bonds are called on December 31, 2010. Use the horizontal model (or write the journal entry) to show the effect of the retirement of the bonds. (Hint: calculate the amount paid to bondholders; then determine how much of the bond discount would have been amortized prior to calling the bonds; and then calculate the gain or loss of retirement.)