Question
12a) Skylar Company issued $50,000,000 of its 10% bonds at par on January 1, 2019. On December 31, 2019, the bonds were trading on the
12a)
Skylar Company issued $50,000,000 of its 10% bonds at par on January 1, 2019. On December 31, 2019, the bonds were trading on the bond exchange at 98 (98% of face value). What happened to the market rate of interest between the issue date and the end of the year?
Choose the right answer below?
- The market rate increased.
- The market rate decreased.
- The change in the market rate cannot be determined.
- The market rate stayed the same.
12b)
Cartwell Corp. had $80 million in pretax accounting income this year. This included estimated warranty expense of $5 million, which is not deductible for tax purposes. Instead, Cartwell may deduct $4 million of actual warranty costs on its tax return. There were no other temporary or permanent book-tax differences. What is Cartwells taxable income for the year?
Choose the right answer below?
- $81 million
- $71 million
- $79 million
- $89 million
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