Calculating the Fair Value of Debt The Longo Corporation issued $50 million maturity value in notes, carrying a coupon rate of 6%, with interest paid semiannually. At the time of the note issue, equivalent risk-rated debt instruments carried yield rates of 8%.

The notes matured in 5 years.

Calculate the proceeds that Longo Corporation will receive from the sale of the notes.

Use Excel or a financial calculator for computations. Round your answers to the nearest dollar.

How will the notes be disclosed on Longos balance sheet immediately following the sale?

Round your answers to the nearest dollar.

Notes payable
Less discount (enter as negative)
Notes payable (net)

Calculate the interest expense for Longo Corporation for the first year that the notes are outstanding.

Do not round until final answer.

Round answers to the nearest dollar.

First six months
Second six months

Calculate the balance sheet value of the notes at the end of the first year.

Do not round until final answer. Round answer to the nearest dollar.

2.) Accounting for Marketable Equity Securities

Among the various responsibilities of the Chief Financial Officer (CFO) of the Amphlett Corporation was the management and oversight of the firms cash reserves. During the year, the CFO had invested some of the firms excess cash in what she thought were three undervalued stocks. All of the securities were classified as available-for-sale. At year-end, she reviewed how the portfolio of investments had done.

Investment	Cost Basis	Market Value at Year-End
Bristol-Myers Squibb, Inc.	$50,000	$42,000
Titanium Metals, Corp	50,000	55,000
Zila, Inc.	50,000	80,000
	$150,000	$177,000

Required

1. Calculate the value that would be assigned to the portfolio of marketable equity securities on the balance sheet of The Amphlett Corporation at year-end under each of the following approaches:

a.	Cost
b.	Lower-of-cost-or-market
	Individual-security basis
	Portfolio basis
c.	Market value

2. How will the appreciation of $27,000 be disclosed on the year-end financial statements if the entire portfolio is classified as:

Trading securities	AnswerUnrealized gain on the income statementComponent of other comprehensive income in the equity section of the balance sheet
Available-for-sale securities	AnswerUnrealized gain on the income statementComponent of other comprehensive income in the equity section of the balance sheet