Calculate the total amount of interest expense over the life of the bonds for the following independent

DOWNLOAD

 Question 1

Calculate the total amount of interest expense over the life of the bonds for the following independent situations.

a) AED100,000 face value, 10%, 10-year bonds issued at 101.

b) AED240,000 face value, 5%, 5-year bonds issued at 100.

c) AED300,000 face value, 9%, 6-year bonds issued at 98.

 Question 2

ABC Corporation issued AED2,000,000 of 10%, 6-year bonds dated July 1, 2011, with semiannual interest payments .  The bonds were issued on January 1, 2011, at 97.  ABC’s year-end is December 31.

a) Were the bonds issued at a premium, a discount, or at par?

b) Was the market rate of interest higher, lower, or the same as the contract rate of interest?

c) If the company uses the straight-line method of amortization, what is the amount of interest expense ABC  Corporation will show for the year ended December 31, 2011?

Question3

On the first day of the current fiscal year, AED2,000,000 of 10-year, 10% bonds, with interest payable annually, were sold for AED2,250,000.  Present entries to record the following transactions for the current fiscal year:

(a)	Issuance of the bonds.
(b)	First annual interest payment.
(c)	Amortization of bond premium for the year, using the straight-line method of amortization.

Question4

Future Sources, Inc. reported the following results for the year ending July 31, 2012:

Retained earnings, August 1, 2011	$875,000
Net income	260,000
Cash dividends declared	120,000
Stock divide nds declared	100,000

Prepare a retained earnings statement for the fiscal year ended July 31, 2012.