SOLVED

30) Cindy Corp sold $400,000 of three-year bonds for $300,500. Interest is of 7.5% is payable annually. What is the effective rate of interest (round to 2 decimal places)? A) 19.15% B) 14.57% C) 13.88% D) 7.50% 3 N, 300500 +/- PV, 400000 FV, 30000 PMT, CPT I/Y I/Y = 19.152% = 19.15% 31) Ginny Inc. sold $800,000 of two-year bonds for $701,500 less commissions of $50,500. Interest is of 5.5% is payable semi-annually. What is the effective rate of interest (round to 2 decimal places)? A) 5.50% B) 8.43% C) 8.65% D) 17.29% PMT = $22,000 ($800,000 × 5.5% × 6/12) 4 N, 651000 +/- PV, 800000 FV, 22000 PMT, CPT I/Y I/Y = 8.427% = 8.43% 32) On June 1, 2017, ABC LTD. provides a vendor with an $18,500 non-interest-bearing note due on June 1, 2018, in exchange for furniture with a list price of $18,100. At what amount will the property be recorded in the accounting records? The company’s banker has suggested that an appropriate market rate is 12% per annum for loans that mature in one year or less and 15% for loans with longer maturities. A) $16,087 B) $16,518 C) $18,100 D) $18,500 33) On May 1, 2017, SBC INC. buys a photocopier listed for $2,900. The office supply store agrees to accept a $800 down payment and a $2,100, three-year note payable at $798 per year. The company’s banker has suggested that an appropriate market rate is 11% per annum for loans that mature in one year or less and 14% for loans with longer maturities. At what amount will the note be recorded at in the accounting records? A) $1,853 B) $1,950 C) $2,100 D) $2,900 34) On May 1, 2017, VeryFine LTD. provides a vendor with a $18,000 non-interest-bearing note due on May 1, 2018 in exchange for furniture with a list price of $17,400. At what amount will the property be recorded in the accounting records? The company’s banker has suggested that an appropriate market rate is 6% per annum for loans that mature in one year or less and 8% for loans with longer maturities. A) $16,415 B) $16,667 C) $16,981 D) $18,000 35) On May 1, 2017, SBC INC. buys a photocopier listed for $2,900. The office supply store agrees to accept a $800 down payment and a $2,100, three-year note payable at $798 per year including interest at 7%. The company’s banker has suggested that an appropriate market rate is 11% per annum for loans that mature in one year or less and 14% for loans with longer maturities. At what amount will the photocopier be recorded at in the accounting records? A) $1,950 B) $2,100 C) $2,900 D) $2,653 36) On June 1, 2017, Bean LTD. provides a vendor with a $125,500 non-interest-bearing note due on June 1, 2020, in exchange for equipment with a list price of $118,100. At what amount will the equipment be recorded in the accounting records? The company’s banker has suggested that an appropriate market rate is 6% per annum for loans that mature in one year or less and 9% for loans with longer maturities. A) $118,100 B) $105,372 C) $96,909 D) $91,195 37) On May 1, 2017, SBC INC. buys a computer listed for $12,600. The office supply store agrees to accept a $1,600 down payment and a $11,000, three-year note payable at $3,500 per year. The company’s banker has suggested that an appropriate market rate is 11% per annum for loans that mature in one year or less and 14% for loans with longer maturities. At what amount will the note be recorded at in the accounting records? A) $1,800 B) $8,126 C) $8,553 D) $11,000 38) Flint Corporation issues a $2,000, five-year, 6% bond, dated January 1, 2017, that pays interest on June 30 and December 31 and is sold at par on March 1, 2017. Provide the journal entry on March 1, 2017, and June 30, 2017. 39) Cartwright Corporation had a $1,350,000, 5% bond available for issue on September 1, 2017. Interest is to be paid quarterly beginning November 30th. All of the bonds were issued at par on October 1st. Prepare the journal entries for October 1st and November 30th.