148. Shin Company has a loan agreement that provides it with cash today, and the company
must pay $25,000 4 years from today. Shin agrees to a 6% interest rate. The present value
factor for 4 periods, 6% is 0.7921. What is the amount of cash that Shin Company receives
today?
149. Hornet Corporation has a loan agreement that provides it with cash today, and the
company must pay $25,000 one year from today, $15,000 two years from today, and $5,000
three years from today. Hornet agrees to pay 10% interest. The following are factors from a
present value table:
Interest rate
Periods
10%
1
0.9091
2
0.8264
3
0.7513
What is the amount of cash that Hornet receives today?
150. A company enters into an agreement to make 5 annual year-end payments of $3,000
each, starting one year from now. The annual interest rate is 6%. The present value of an
annuity factor for 5 periods, 6% is 4.2124. What is the present value of these five payments?
151. On January 1, the Plimpton Corporation leased some equipment on a 2-year lease,
paying $15,000 per year each December 31. The lease is considered to be an operating lease.
Prepare the general journal entry to record the first lease payment on December 31.
152. On January 1, Leyden Corporation leased a truck, agreeing to pay $15,252 every
December 31 for the six-year life of the lease. The present value of the lease payments, at 6%
interest, is $75,000. The lease is considered a capital lease.
(a) Prepare the general journal entry to record the acquisition of the truck with the capital
lease.
(b) Prepare the general journal entry to record the first lease payment on December 31.
(c) Record straight-line depreciation on the truck on December 31, assuming a 6-year life and
no salvage value.
153. Harrison Company’s balance sheet reflects total assets of $250,000 and total liabilities of
$150,000. Calculate the company’s debt-to-equity ratio.
154. On October 1 of the current year a corporation sold, at par plus accrued interest,
$1,000,000 of its 12% bonds, which were dated July 1 of this year. What amount of bond
interest expense should the company report on its current year income statement?
155. A company issued 9%, 10-years bonds with a par value of $1,000,000 on September 1,
Year 1 when the market rate was 9%. The bonds were dated June 30, Year 1. The bond issue
price included accrued interest. Interest is paid semiannually on December 31 and June 30.
(a) Prepare the issuer’s journal entry to record the issuance of the bonds on September 1.
(b) Prepare the issuer’s journal entry to record the semiannual interest payment on December
31, Year 1.
156. On June 1, a company issued $200,000 of 12% bonds at their par value plus accrued
interest. The interest on these bonds is payable semiannually on January 1 and July 1. Prepare
the issuer’s journal entry to record the bond issuance of June 1.
157. Martin Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value on
January 1. Interest is payable each June 30 and December 31.
(a) Prepare the general journal entry to record the issuance of the bonds on January 1.
(b) Prepare the general journal entry to record the first interest payment on June 30.
158. A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid
semiannually. The market interest rate on the issue date was 10%, and the issuer received
$95,016 cash for the bonds. On the first semiannual interest date, what amount of cash should
be paid to the holders of these bonds for interest?
159. On January 1, a company issued 10-year, 10% bonds payable with a par value of
$500,000, and received $442,647 in cash proceeds. The market rate of interest at the date of
issuance was 12%. The bonds pay interest semiannually on July 1 and January 1. The issuer
uses the straight-line method for amortization. Prepare the issuer’s journal entry to record the
first semiannual interest payment on July 1.
160. A company issued 10-year, 9% bonds, with a par value of $500,000 when the market
rate was 9.5%. The issuer received $484,087 in cash proceeds. Prepare the issuer’s journal
entry to record the bond issuance.
161. A company issued 10-year, 9% bonds with a par value of $500,000 when the market
rate was 9.5%. The company received $484,087 in cash proceeds. Using the straight-line
method, prepare the issuer’s journal entry to record the first semiannual interest payment and
the amortization of any bond discount or premium.
162. A company issues bonds with a par value of $800,000 on their issue date. The bonds
mature in 5 years and pay 6% annual interest in two semiannual payments. On the issue date,
the market rate of interest is 8%. Compute the price of the bonds on their issue date. The
following information is taken from present value tables:
Present value of an annuity for 10 periods at 3% ………. 8.5302
Present value of an annuity for 10 periods at 4% ………. 8.1109
Present value of 1 due in 10 periods at 3%………………. 0.7441
Present value of 1 due in 10 periods at 4% …………………. 0.6756
163. A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid
semiannually. The market interest rate on the issue date was 10%, and the issuer received
$95,016 cash for the bonds. The issuer uses the effective interest method for amortization. On
the first semiannual interest date, what amount of discount should issuer amortize?
164. A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, at a
selling price of $885,295, to yield the buyers a 12% return. The company uses the effective
interest amortization method. Interest is paid semiannually each June 30 and December 31.
(1) Prepare an amortization table for the first two payment periods using the format shown
below:
Semiannual
Cash
Bond
Interest
Interest
Interest
Discount
Unamortized
Carrying
Period
Paid
Expense
Amortization
Discount
Value
(2) Prepare the journal entry to record the first semiannual interest payment.
Discount
Carrying
Period
Paid
Expense
Amortization
Discount
Value
165. A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate
was 9.5%. The company received $484,087 in cash proceeds. Using the effective interest
method, prepare the issuer’s journal entry to record the first semiannual interest payment and
the amortization of any bond discount or premium.
166. On January 1, a company issued 10%, 10-year bonds payable with a par value of
$720,000. The bonds pay interest on July 1 and January 1. The bonds were issued for
$817,860 cash, which provided the holders an annual yield of 8%. Prepare the journal entry to
record the first semiannual interest payment, assuming it uses the straight-line method of
amortization.
167. On January 1, a company issues bonds with a par value of $300,000. The bonds mature
in 5 years and pay 8% annual interest each June 30 and December 31. On the issue date, the
market rate of interest is 6%. Compute the price of the bonds on their issue date. The
following information is taken from present value tables:
Present value of an annuity for 10 periods at 3%……..
8.5302
Present value of an annuity for 10 periods at 4%……..
8.1109
Present value of 1 due in 10 periods at 3%…………….
0.7441
Present value of 1 due in 10 periods at 4%…………….
0.6756
168. On January 1, a company issues bonds with a par value of $300,000. The bonds mature
in 5 years, and pay 8% annual interest, payable each June 30 and December 31. On the issue
date, the market rate of interest for the bonds is 10%. Compute the price of the bonds on their
issue date. The following information is taken from present value tables:
Present value of an annuity for 10 periods at 4%
8.1109
Present value of an annuity for 10 periods at 5%
7.7217
Present value of 1 for 10 periods at 4%
0.6756
Present value of 1 for 10 periods at 5%
0.6139
169. On March 1, a company issues bonds with a par value of $300,000. The bonds mature in
10 years, and pay 6% annual interest, payable each June 30 and December 31. The bonds sell
at par value plus interest accrued since January 1. Prepare the general journal entry to record
the issuance of the bonds on March 1.
170. On August 1, a company issues bonds with a par value of $600,000. The bonds mature in
10 years, and pay 6% annual interest, payable each February 1 and August 1. The bonds sold
at $632,000. The company uses the straight-line method of amortizing bond premiums. The
company’s year-end is December 31. Prepare the general journal entry to record the interest
accrued at December 31.
171. On August 1, a company issues bonds with a par value of $600,000. The bonds mature in
10 years, and pay 6% annual interest, payable each February 1 and August 1. The bonds sold
at $592,000. The company uses the straight-line method of amortizing bond discounts. The
company’s year-end is December 31. Prepare the general journal entry to record the interest
accrued at December 31.
172. Walker Corporation issued 14%, 5-year bonds with a par value of $5,000,000 on January
1, Year 1. Interest is to be paid semiannually on each June 30 and December 31. The bonds
are issued at $5,368,035 cash when the market rate for this bond is 12%.
(a) Prepare the general journal entry to record the issuance of the bonds on January 1, year 1.
(b) Show how the bonds would be reported on Walker’s balance sheet at January 1, Year 1.
(c) Assume that Walker uses the effective interest method of amortization of any discount or
premium on bonds. Prepare the general journal entry to record the first semiannual interest
payment on June 30, Year 1.
(d) Assume instead that Walker uses the straight-line method of amortization of any discount
or premium on bonds. Prepare the general journal entry to record the first semiannual interest
payment on June 30, Year 1.