Questions -
1. Donaldson Incorporated sold $500,000 of 12% bonds on January 1, 2009, for $470,143.47, a price that yields a 14% interest rate. The bonds pay interest semi annually on June 30 and December 31 and are due December 31, 2012. The company uses the effective interest method.
a. Prepare an interest expense and discount amortization schedule
b. Assume the company reacquired the bonds on July1, 2011 at 104. Prepare Journal entries to record the bond retirement.
2. The Miller Corporation acquired 30% of the outstanding common stock of the Crowell Corporation for $160,000 on January 1, 2010 and obtained significant influence. The purchase price of the shares was equal to their book value. During 2010, the following information is available for Crowell:
Mar. 31 Declared and paid a cash dividend of $ 50,000
June 30 Reported semi-annual earnings of $120,000 for the first half of 2010
Sept. 30 Declared and paid a cash divided of $50,000
Dec. 31 Reported semi-annual earnings of $140,000 for the second half of 2010
a. Prepare journal entries for Miller to reflect the preceding information
b. What the balance in Miller's investment account on December 31, 2010? (Show your computations)
Q3. What is the market value (cash Proceeds) of each of the following bond issues? (Round to the nearest dollar)
a. 9% bonds of $200,000 sold on bond issue date; 5-year life; interest Payable semi annually; effective rate , 8%
b. 8% bonds of $150,000 sold 30 months after bond issue date; 15-year life; interest payable semi annually; effective rate, 10%.