5. When the interest payment dates of a bond are May 1 and November 1, and the bond is issued on June 1, year 1, the amount of interest expense for the year ended December 31, year 1, would be for
6. White Airlines sold a used jet aircraft to Brown Company for $ 800,000, accepting a 5-year 6 % note for the entire amount. Brown’ s incremental borrowing rate was 14 %. The annual payment of principal and interest on the note was to be $ 189,930. The aircraft could have been sold at an established cash price of $ 651,460. The present value of an ordinary annuity of $ 1 at 8 % for five periods is 3.99. The aircraft should be capitalized on Brown’ s books at
7. Which formula should Foley use in cell E3 to calculate the bonds’ carrying amount at the end of year 2?
8. On September 1, year 1, a company borrowed cash and signed a 2- year interest-bearing note on which both the principal and interest are payable on September 1, year 3. The company did not elect the fair value option for reporting this note. At December 31, year 2, the liability for accrued interest should be
9. On January 1, 2000, Fox Corp. issued 1,000 of its 10 %, $ 1,000 bonds for $ 1,040,000. These bonds were to mature on January 1, 2010 but were callable at 101 any time after December 31, 2003. Interest was payable semi-annually on July 1 and January 1. On July 1, 2005, Fox called all of the bonds and retired them. 10. The bond premium was amortized on a straight-line basis. Before income taxes, Fox ' s gain or loss in 2005 on this early extinguishment of debt was 11. An investor purchased a bond classified as a long-term investment between interest dates at a premium. At the purchase date, the carrying value of the bond is more than the
12. A company has outstanding accounts payable of $ 30,000 and a short-term construction loan in the amount of $ 100,000 at year-end. The loan was refinanced through issuance of long-term bonds after