Question 1
On January 1, 2012, PVP Co. issued 6 % bonds with a face value of $5,000,000 when the market interest rate was 10 %. The bonds are due in 10 years, and interest is payable semiannually every June 30 and December 31. Using the appropriate factors below, calculate the selling price of the bond (round your final answer).
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Present value of an ordinary annuity of $1
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At 3% 10 periods=8.5302
At 5% 20 periods=12.4622
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At 6% 10 periods=7.3601
At 10% 10 periods=6.1446
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Present value of $1
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At 3% 10 periods=0.7441
At 5% 20 periods=0.3769
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At 6% 10 periods=0.5584
At 10% 10 periods=0.3855
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Use the answer sheet provided.
Question 2
The trial balance before adjustment for the A&E Corporation shows the following balances:
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Debit
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Credit
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Accounts Receivable
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$300,000
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Allowance for Doubtful Accounts
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$1,000
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Sales
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$700,000
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Sales Returns and Allowances
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$10,000
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Using the data above, show computations and prepare the journal entries required to record each of the following:
a. The company wants to maintain the Allowance for Doubtful Accounts at 6% of gross accounts receivable. Show computation and prepare your journal entry using the answer sheet provided.
b. The company wishes to increase the allowance by 3% of net sales. Show computation and prepare your journal entry using the answer sheet provided.