Finance Help

Test 1 Intermediate Accounting II Spring 2008 Chapters 14,15,16a

Name: __________________________

Use the following to answer questions 1-2:

Cox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%.

1.|One step in calculating the issue price of the bonds is to multiply the principal by the table value for|

A)|10 periods and 10% from the present value of 1 table.|

B)|20 periods and 5% from the present value of 1 table.|

C)|10 periods and 8% from the present value of 1 table.|

D)|20 periods and 4% from the present value of 1 table.|

2.|Another step in calculating the issue price of the bonds is to|

A)|multiply $10,000 by the table value for 10 periods and 10% from the present value of an annuity table.|

B)|multiply $10,000 by the table value for 20 periods and 5% from the present value of an annuity table.|

C)|multiply $10,000 by the table value for 20 periods and 4% from the present value of an annuity table.|

D)|none of these.|

3.|Stone, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that|

A)|the effective yield or market rate of interest exceeded the stated (nominal) rate.|

B)|the nominal rate of interest exceeded the market rate.|

C)|the market and nominal rates coincided.|

D)|no necessary relationship exists between the two rates.|

Use the following to answer questions 4-6:

On January 1, 2007, Bleeker Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are:

Present value of 1 for 8 periods at 6%||.627|

Present value of 1 for 8 periods at 8%||.540|

Present value of 1 for 16 periods at 3%||.623|

Present value of 1 for 16 periods at 4%||.534|

Present value of annuity for 8 periods at 6%||6.210|

Present value of annuity for 8...