1)

In a recent year Apple Corporation had net income of $200,000, interest expense of $30,000, and a times interest earned ratio of 7. What was Apple Corporations income before taxes for the year

$240,000

None of these answer choices are correct.

$180,000

$210,000

2)

PV of $1
n/i	5%	8%	10%
1	0.95238	0.92593	0.90909
2	0.90703	0.85734	0.82645
3	0.86384	0.79383	0.75131

PV of Annuity of $1
n/i	5%	8%	10%
1	0.95238	0.92593	0.90909
2	1.85941	1.78326	1.73554
3	2.72325	2.57710	2.48685

On January 1, 2017, JUN Corp. issued $100,000 face value, 10%, 3-year bonds. At that time, market interest rate is 8%. JUN Corp. uses effective-interest method to amortize bond premium or discount. The bonds pay annual interest at December 31. JUN Corp. redeems the bond on maturity.

Assume that on January 1, 2019, Claire Corp. calls the bonds. The call price is 101. Prepare the journal entry to record the redemption of the bonds.

a)

Dr) Bonds Payable100,000

Loss on Bond Redemption 1,000

Cr) Cash 101,000

b)

Dr) Bonds Payable 100,000

Premium on Bonds Payable 160

Loss on Bond Redemption 840

Cr) Cash 101,000

c)

Dr) Bonds Payable 100,000

Premium on Bonds Payable 1,000

Cr) Cash 101,000

d)

Dr) Bonds Payable 100,000

Premium on Bonds Payable 1,851

Cr) Cash 101,000

Gain on Bonds Redemption 851

3)

PV of $1
n/i	5%	8%	10%
1	0.95238	0.92593	0.90909
2	0.90703	0.85734	0.82645
3	0.86384	0.79383	0.75131

PV of Annuity of $1
n/i	5%	8%	10%
1	0.95238	0.92593	0.90909
2	1.85941	1.78326	1.73554
3	2.72325	2.57710	2.48685

On January 1, 2017, JUN Corp. issued $100,000 face value, 10%, 3-year bonds. At that time, market interest rate is 8%. JUN Corp. uses effective-interest method to amortize bond premium or discount. The bonds pay annual interest at December 31. JUN Corp. redeems the bond on maturity.

Prepare the journal entry on December 31, 2018.

a)

Dr) Interest Expense 8,160

Premium on Bonds Payable 1,840

Cr) Cash 10,000

b)

Dr) Interest Expense 8,285

Premium on Bonds Payable 1,715

Cr) Cash 10,000

c)

Dr) Interest Expense 10,000

Cr) Cash 10,000

d)

Dr) Interest Expense 9,016

Premium on Bonds Payable 984

Cr) Cash 10,000