1. On January 1, 2018 Carter Corporation wishes to issue $1,000,000 of its 6%, 10-year bonds. The bonds pay interest annually on January 1. The current market rate on such bonds is 5%. (Round time value factors to four decimal places.)

Cash Received upon Issuance ________________________________ _____

2. On January 1, 2017, Gore Co. sold to Cey Corp. $800,000 of its 10% bonds for $708,236 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Gore report as interest expense for 2017. _______________________________________ _____

3. Ziggy is considering purchasing a new car. The cash purchase price for the car is $39,200. What is the annual interest rate if Ziggy is required to make annual payments of $9,100 at the end of the next five years? ______________________________ _____

4. A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. What will the carrying value of the bonds be on the December 31, 2017 balance sheet? _____

5. A machine is purchased by making payments of $8,000 at the beginning of each of the next five years. The interest rate was 10%. What was the cost of the machine?

a. $53,725 b. $48,841 c. $33,359 d. $30,327

6. In the recent year Hill Corporation had net income of $240,000, interest expense of $60,000, and tax expense of $90,000. What was Hill Corporation's times interest earned ratio for the year? _____________________________

7. On January 1, 2017, Crown Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave Crown a $4,000,000 zerointerest-bearing note payable in 5 equal annual installments of $800,000, with the first payment due December 31, 2017. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $2,884,000 at January 1, 2017. What should be the 2 balance of the Discount on Notes Payable account on the books of Leary at December 31, 2017 after adjusting entries are made, assuming that the effective-interest method is used?

a. $0 b. $856,440 c. $892,800 d. $1,116,000

Use the following information for questions 8 through 10

On June 1, 2015 the Diamond Bottle Company sold $400,000 in long-term bonds to the Silver Jewelry Company. The bonds will mature in 10 years and have a stated interest rate of 9%. The market rate at time of issuance was 12%. Therefore, the bonds sold for $332,196. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective interest method. Below is a partial bond amortization schedule.

	Cash	Interest Expense	Amortization	Carrying Value
6/1/2015				332,196
5/31/2016	36,000	39,864	3,864	336,060
5/31/2017	36,000	40,327	4,327	340,387
5/31/2018	36,000	40,846	4,846	345,233

8. Diamond Bottle company's year end is 12/31. What amount of interest expense should Diamond Bottle Company report at the end of December 31, 2015? _______________________

If Diamond Bottle Company buys back the bonds at 101 plus accrued interest on December 31, 2017.

9. What is the amount of total cash paid out when the bonds are recalled? ___________________

10. What is the gain/loss reported on the retirement of bonds? (be sure to include the $ amount and note gain or loss). _____________________________