1. On December 31, 2020 Company A issued a three-year face value $13,000,000, 5.5% annual coupon bond with interest payable semi-annually. On the bonds date of issue, the market rate of interest (yield to maturity) was 4%. The $13,000,000 bond was settled (sold) on April 30, 2021.
   1. What was the dollar ($) quote price [ask or clean price] of the bond on the issue date?
   2. Is this a discount or premium bond and what is the amount of the premium or discount?
   3. What was the dollar ($) cash price [dirty price] of the bond on the settlement date?
   4. How much cash did Company A receive on the settlement date?
   5. How much did Company A borrow as of the settlement date?
   6. How much interest expense would be recorded on Company As regular income statement for the year ended December 31, 2021?
   7. On Company As December 31, 2021 balance sheet, what is the reported amount of the bond liability?
   8. Over the life of the bond, what is the total amount of cash Company A will pay to repay the amount it borrowed?
2. Shipping R US (LESSEE) leased an ocean-liner freighter from Viking Ships (LESSOR). The lease is non-cancelable and requires beginning of the year (annuity due) payments of $1,281,612.40 for seven years. At the end of the lease term the ocean-liner freighter reverts back to Viking Ships. Shipping R US's incremental borrowing rate is 7%, but knows that Viking Ships used a 4% present value discount rate in determining the annual lease payments. The current fair value of the ocean-liner freighter is $7,500,000 and has an estimated useful life of 10 years. The lease requires Shipping R US to guarantee that the residual value of the ocean-liner freighter at the end of the lease will be $300,000. Shipping R US expects that it is probable that the expected value of the ocean-liner will be greater than the $300,000 guaranteed residual value at the end of the lease. The lease also requires Shipping R US to pay all executor costs, such as insurance, maintenance and taxes, of the ocean-liner freighter. Shipping R US uses the straight-line depreciation/amortization method for all of its CAPEX (property and equipment) assets.
   1. From the perspective of the lessee, is the lease a financing or operating lease?
   2. What is the lessees initial total lease obligation amount?
   3. What is the lessee total initial right of use asset amount?
   4. What is the amount of lessees annual amortization expense of the right of use asset for year 1, if any?
   5. What is the amount of lessees interest expense from the lease obligation on the income statement for year 1, if any?

1. In year one what is the lessees total amount of lease expense that would be included in its regular income statement.
2. At the end of year 2, what is the amount of the lessees right of use asset balance on its balance sheet?
3. At the end of year 2, what is the lessees current portion of lease obligation on its balance sheet?
4. At the end of year 2, what is the lessees non-current portion of lease obligation on its balance sheet?
5. At the end of year 2 what was the leases effect on the lessees cash amount on its balance sheet?
6. At the end of year 2 what was the leases effect on the amount of the lessees retained earnings on its balance sheet?
7. Shipping R US (LESSEE) leased an ocean-liner freighter from Viking Ships (LESSOR). The lease is non-cancelable and requires beginning of the year (annuity due) payments of $1,566,803.78 for four years. At the end of the lease term the ocean-liner freighter reverts back to Viking Ships, unless Shipping R US pays Viking Ships $10 at the end of the lease. If Shipping R US pays the $10 then Shipping R US owns the ocean-liner freighter. Shipping R US's incremental borrowing rate is 6%, but knows that Viking Ships used a 3.5% present value discount rate in determining the annual lease payments. The current fair value of the ocean-liner freighter is $6,000,000.02 and has an estimated useful life of 10 years. The lease requires Shipping R US to guarantee that the residual value of the ocean-liner freighter at the end of the lease will be $200,000. Shipping R US expects that it is probable that the expected value of the ocean-liner will be $150,000 (75% of $200,000) at the end of the lease. The lease also requires Shipping R US to pay all executor costs, such as insurance, maintenance and taxes, of the ocean-liner freighter. Shipping R US uses the straight-line depreciation/amortization method for all of its CAPEX (property and equipment) assets.
   1. From the perspective of the lessee, is the lease a financing or operating lease?

1. What is the lessees initial total lease obligation amount?
2. What is the lessee total initial right of use asset amount?
3. What is the amount of lessees annual amortization expense of the right of use asset for year 1, if any?
4. What is the amount of lessees interest expense from the lease obligation on the income statement for year 2, if any?
5. In year two what is the lessees total amount of lease expense that would be included in its regular income statement.
6. At the end of year 3, what is the amount of the lessees right of use asset balance on its balance sheet?
7. At the end of year 3, what is the lessees current portion of lease obligation on its balance sheet?
8. At the end of year 3, what is the lessees non-current portion of lease obligation on its balance sheet?
9. At the end of year 3 what was the leases effect on the lessees cash amount on its balance sheet?
10. At the end of year 3 what was the leases effect on the amount of the lessees retained earnings on its balance sheet?