ACC 342 Lecture Notes - Lecture 13: Savings Account

Klaus Associates issued $ 500,000 par​ value, four ​-year, ​zero-coupon bonds on January​ 1, 2016 . The market rate of interest on the date of the bond issue was 4 ​%. Bond issue costs are $ 4,400. The​ company's fiscal year ends on December 31

A. Determine the issue price of the debt

B. Prepare the amortization table for the bond issue, assumin that Klause uses the effective interest rate method of amortization.

C. Prepare the journal entries to record the bond issue and the entries on December​ 31,2016 Assume the company uses a discount or premium​ account, if needed.

D. Describe the income​ statement, balance​ sheet, and cash flow statement effects of the bond​ issue, amortization of the bond issue​ costs, and the amortization of discount.

E. The bonds are retired early on April 30, 2017, for $ 461, 000. Prepare the journal entry.

Using Future Value of 1 table for 2016

Using Future Value of an Ordinary Annuity Table 2016

Using Future Value of an Annuity Due Table 2016

Present Value of​ $1 table 2016

Present Value of​ an Ordinary Annuity Table 2016

Present Value of​ an Annuity Due Table 2016

Jack Sawyer is presently leasing a copier from John OfficeEquipment Company. The lease requires 11 annual payments of $3,500at the end of each year and provides the leaser (John) with an 8%return on its investment. You may use the following 8% interestfactors.

Instructions
(a) Assuming the computer has an 11-year life and will have nosalvage value at the expiration of the lease, what was the originalcost of the copier to John?
(b) What amount would each payment be if the 11 annual payments areto be made at the beginning of each period

On January 1, 2016, Glanville Company sold goods to OtterCorporation. Otter signed an installment note requiring payment of$15,000 annually for six years. The first payment was made onJanuary 1, 2016. The prevailing rate of interest for this type ofnote at date of issuance was 8%.

Glanville should record sales revenue in January 2016 of:

None of these answer choices is correct.

$90,000.

$74,891.

$69,343.

Yamaha Inc. hires a new chief financial officer and promises topay him a lump-sum bonus four years after he joins the company. Thenew CFO insists that the company invest an amount of money at thebeginning of each year in a 7% fixed rate investment fund to insurethe bonus will be available. To determine the amount that must beinvested each year, a computation must be made using the formulafor:

None of these answer choices is correct.

The future value of an annuity due.

The future value of a deferred annuity.

The future value of an ordinary annuity

Incognito Company is contemplating the purchase of a machinethat provides it with net after-tax cash savings of $92,000 peryear for five years. Interest is 10%. Assume the cash savings occurat the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1)

a)alculate the present value of the cash savings