Chapter 6 and 14: without computations

Jan 1, 2017. Ellison Co issued 8 year bonds with FV of 6,000,000 and stated interest 6% Payable semiannually on June 30 and Dec 31. Bonds sold 8%. Table values -PV of 1 for 8 periods at 8%= .627 -PV of 1 for 16 periods at 4%= .534 -PV of annuity of 8 periods at 6%= 6.210

3,204,000 .534

Anna has 18,000 to invest. She requires 30,000 for a down payment for a house. If she is able to invest at 6% how many years will it be before she will accumulate the desired balance?

9 years

Given below are the present value factors of 1.00 discounted at 10% for 1 to 5 periods. Interest compound annually is 10% period 1= .909 period 2= .826 What amount should an individual have in a bank account before withdrawal if 9,000 is needed each year for 4 years with the first withdrawal to be made today and each subsequent withdrawl at 1 year interest

9,000+(9,000x.909)+ (9,000x.826)+ (9,000x.751)

Which of the following transactions would be best use the present value of an annuity due of 1 table

Fernetti, Inc. rents a truck for 5 years with annual rental payments of 20,000 to be made at the beginning of each year

In a troubled debt restructuring in which the debt is continued with modified terms and the CV amount of debt is less than the total future cash flows,

a new effective-interest rate must be computed

An early extinguishment of bonds payable which were originally issued at a premium, is made by purchase of the bonds between interest dates. At the time of reacquisition:

all are correct -interest must be accrued from last interest date to the purchase date -any costs of using the bonds must be amortized up the purchase date -premium must be amortized up to the purchase date

If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a:

credit to interest expense

If bonds are initially sold at a discount and the straight line method of amortization is used, the interest expense in the earlier years will:

exceed what it would have been had the effective interest method of amortization been used

What factor would be greater- the present value of 1 for 10 periods at 8 % per period or the future value of 1 for 10 periods at 8% per period?

future value of 1 for 10 periods at 8% per period

Which of the following statements is true?

if money is worth 10% compounded annually, 1,100 due 1 year from today is equivalent to 1,000 today

Steinway company requires a new manufacturing facility. It found 3 locations, all that which provided the needed capacity..........Which option is the least costly to the company?

location C

Note disclosures for long-term debt generally include all of the following except:

names of specific creditors

Fox Co. issued 100,000 of 10 years. 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. Another step in calculating the issue price of the bonds is to:

none of these are correct (multiply 5,000 by the table value of 20 periods and 4% from the PV of an annuity table)

On June 1, 2017, Pitts Company sold some equipment to Gannon Company. The 2 companies entered into an installment sales contract at 8% rate. Contract required8 equal annual payments. What type of compound interest is appropriate?

present value of an annuity due of 1 table

A corporation borrowed money from a bank to build a building. The long term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank 80,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation?

the amount of interest expense will decrease each period the loan is outstanding while the portion of the annual payment applied to the load principal will increase each period

Which of the following arguments is presented by FASB explain why a gain is recorded by a company when its creditworthiness is becoming worse?

the debt holders loss is the shareholders gain

Jerry recently was offered a position with a major accounting firm. The firm offered Jerry either signing bonus of 23,000 payable on the first day of work or a signing bonus of 26,000 payable after 1 year of employment. Assuming that the relevant interest rate is 10%, what should he choose?

the signing bonus of 26,000 payable after 1 year of employment