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On January 1, 2007, Guardiola, Inc. sold 8% bonds with a face value of $600,000. These bonds mature in five years, and interest is paid semiannually...
- On January 1, 2007, Guardiola, Inc. sold 8% bonds with a face value of $600,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold to yield 10%. The applicable income tax rate is 35%. If the appropriate entry on June 30, 2007 is made, but the entry on December 31, 2007 is skipped, net income for 2007 will be:
a. $18,114 overstated.
b. $18,114 understated.
c. $15,600 overstated.
d. $15,600 understated .
2. On January 1, 2007, a company sold 12% bonds with a face value of $600,000. The bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds yield 10%. Using the effective-interest method of amortization, interest expense for 2007 is approximately
a. 405,000.
b. $374,800.
c. $364,500.
d. $304,500. (Please show how you get the present value of this one)
3.
a. $405,000.
b. $374,800.
c. $364,500.
d. $304,500.
4.
a. $75,000 gain.
b. $45,000 gain.
c. $75,000 loss.
d. $45,000 loss
