Question

1. Moss Co. issued $750,000 of four-year, 12% bonds, with interest payable semiannually, at a market (effective) interest rate of 11%.

Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar.
$

2. Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows.

Journalize the transactions.

3.

ndicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:

a. Decrease in inventory
b. Increase in accounts receivable
c. Increase in accounts payable
d. Loss on retirement of long-term debt
e. Depreciation of fixed assets
f. Decrease in notes receivable due in 60 days from customers
g. Increase in salaries payable
h. Decrease in prepaid expenses
i. Amortization of patent
j. Increase in notes payable due in 120 days to vendors
k. Gain on disposal of fixed assets

If no entry is required, select "No Entry Required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

Jan. 8. Split the common stock 2 for 1 and reduced the par from $40 to $20 per share. After the split, there were 129,000 common shares outstanding.

Jan. 8

Apr. 30. Declared semiannual dividends of $0.90 per share on 9,000 shares of preferred stock and $0.12 per share on the common stock payable on July 1.

Apr. 30

July 1. Paid the cash dividends.

July 1

Oct. 31. Declared semiannual dividends of $0.90 per share on the preferred stock and $0.09 per share on the common stock (before the stock dividend). In addition, a 3% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $36.

Oct. 31
Oct. 31

Dec. 31. Paid the cash dividends and issued the certificates for the common stock dividend.

Dec. 31
Dec. 31

Answer 1

Answer to Question 1:

Face Value of Bonds = $750,000

Annual Coupon Rate = 12.00%
Semiannual Coupon Rate = 6.00%
Semiannual Coupon = 6.00% * $750,000
Semiannual Coupon = $45,000

Time to Maturity = 4 years
Semiannual Period = 8

Annual Interest Rate = 11.00%
Semiannual Interest Rate = 5.50%

Present Value of Bonds Payable = $45,000 * PVA of $1 (5.50%, 8) + $750,000 * PV of $1 (5.50%, 8)
Present Value of Bonds Payable = $45,000 * 6.3346 + $750,000 * 0.6516
Present Value of Bonds Payable = $773,757