If using PV FV tables, do not round the factors Use all five of the numbers to the right of the decimal point Juan Company is seeking to borrow some money on a long term basis This firm is considering pursuing one of two alternatives (1) issuing twenty bonds with a face amount of $1,000 each or (2) signing a long term note payable for $17,000 Assume that both alternatives would provide cash to Merle on December 31, Year 1 The terms of the two alternatives are presented below The bonds would have a coupon rate of 8 and a market rate effective rate of 10 The bonds would pay interest semiannually on June 30 and Dec 31 and would have a maturity date on Dec 31, Year 12 The note payable would have an interest rate of 8 and would be paid off over 5 years with equal quarterly installments starting three months after Dec 31, Year 1 These payments would fully amortize the notes principal and interest Amortize means pay off This is a long term Note Payable as it extends for longer than one year If using the PV FV tables, do not round the factors from the way they are shown in the tables Present your answers in whole dollar amounts only, without '$' signs and without commas 1 How much cash would issuing the bonds on Dec 31, Year 1, provide to Merle on that date This is the issue price 2 How much Interest Expense would the firm recognize in Year 2 if it issued the Bonds Payable Year 2 ends on Dec 31, Year 2 3 How much Interest Expense would the firm recognize in Year 2 if it borrows using the Note Payable Year 2 ends on Dec 31, Year 2 4 How much cash will Merle have to pay out in Year 3 if issuing the Bonds Payable 5 How much cash will Merle have to pay out in Year 3 if issuing the long term Note Payable 6 What would the carrying value of the Note Payable be on Dec 31, Year 5, after making the sixteenth loan payment on that date 7 What would the carrying value of the Bonds Payable be on Dec 31, Year 5, after making the interest payment on that date

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If using PV/FV tables, do not round the factors. Use all five of the numbers to the right of the decimal point. Juan Company is

If using PV/FV tables, do not round the factors. Use all five of the numbers to the right of the decimal point.

Juan Company is seeking to borrow some money on a long-term basis. This firm is considering pursuing one of two alternatives: (1) issuing twenty bonds with a face amount of $1,000 each or (2) signing a long-term note payable for $17,000. Assume that both alternatives would provide cash to Merle on December 31, Year 1.

The terms of the two alternatives are presented below:

The bonds would have a coupon rate of 8% and a market rate [effective rate] of 10%. The bonds would pay interest semiannually on June 30 and Dec. 31 and would have a maturity date on Dec. 31, Year 12.
The note payable would have an interest rate of 8% and would be paid off over 5 years with equal quarterly installments starting three months after Dec. 31, Year 1. These payments would fully amortize the notes principal and interest. Amortize means pay off. This is a long-term Note Payable as it extends for longer than one year.

If using the PV/FV tables, do not round the factors from the way they are shown in the tables. Present your answers in whole dollar amounts only, without '$' signs and without commas.

#1. How much cash would issuing the bonds on Dec. 31, Year 1, provide to Merle on that date? This is the issue price. _______

#2. How much Interest Expense would the firm recognize in Year 2 if it issued the Bonds Payable? Year 2 ends on Dec. 31, Year 2. _________

#3. How much Interest Expense would the firm recognize in Year 2 if it borrows using the Note Payable? Year 2 ends on Dec. 31, Year 2. ________

#4. How much cash will Merle have to pay out in Year 3 if issuing the Bonds Payable? _______

#5. How much cash will Merle have to pay out in Year 3 if issuing the long-term Note Payable? _______

#6. What would the carrying value of the Note Payable be on Dec. 31, Year 5, after making the sixteenth loan payment on that date? ______

#7. What would the carrying value of the Bonds Payable be on Dec. 31, Year 5, after making the interest payment on that date? ______