Question : 81. Fox Co., Inc.On January 1, Year 1, Fox Co., Inc., : 1245672

81. Fox Co., Inc.

On January 1, Year 1, Fox Co., Inc., issues $100,000 par value, 10% bonds maturing in 10 years to yield 12% per year, compounded semiannually on January 1 and July 1. Use the present value tables.

Refer to the Fox Co. Inc. example. What is the bonds payable account (net of any bond discount or premium) at the end of Year 2 to the nearest amount shown? 
A. $104,374
B. $100,000
C. $89,172
D. $85,519
E. $83,519

82. Fox Co., Inc.

On January 1, Year 1, Fox Co., Inc., issues $100,000 par value, 10% bonds maturing in 10 years to yield 12% per year, compounded semiannually on January 1 and July 1. Use the present value tables.

Refer to the Fox Co., Inc. example. How much are the initial issue proceeds to the nearest amount shown? 
A. $32,197
B. $88,530
C. $100,000
D. $112,462
E. $102,462

83. When the market interest rate exceeds the coupon rate; the market price of the bond  
A. will be more than par.
B. will be less than par.
C. will be equal to par.
D. is not affected.
E. none of the above

84. (CMA adapted, Jun 86 #5) A bond issue sold at a premium is valued on the statement of financial position at the 
A. maturity value.
B. maturity value plus the unamortized portion of the premium.
C. maturity value less the unamortized portion of the premium.
D. current market value.
E. par value.

85. (CMA adapted, Dec 86 #20) On January 1, Year 1, Nicole Company sold its 5-year, $100,000 face value, 8% bonds at $108,530, to yield an effective annual interest rate of 6%. The bonds are dated January 1, Year 1, and interest is payable annually on January 1. Using the effective interest method of premium amortization, the amount of interest expense (rounded to the nearest dollar) reported by Nicole Company in Year 1 is 
A. $1,488
B. $6,512
C. $8,000
D. $8,682
E. $9,681

86. Heather Corporation

Heather Corporation issued $2,000,000, 10-percent, 10-year bonds on January 2, Year 2. The bonds pay interest semiannually on January 1 and July 1. The bonds were priced on the market to yield 8 percent.

Refer to the Heather Corporation example. The issue price of the bonds is calculated as follows: 
A. the present value of $2,000,000 at 10 percent for 10 periods, plus the present value of an annuity of $100,000 at 4 percent for 20 periods.
B. the present value of $2,000,000 at 5 percent for 20 periods, plus the present value of an annuity of $100,000 at 5 percent for 20 periods.
C. the present value of $2,000,000 at 8 percent for 10 periods, plus the present value of an annuity of $100,000 at 4 percent for 20 periods.
D. the present value of $2,000,000 at 4 percent for 20 periods, plus the present value of an annuity of $100,000 at 4 percent for 20 periods.
E. none of the above

87. (CMA adapted, Dec 90 #12) Marla, Inc. issued $6,000,000 of 12% bonds on December 1, Year 1, due on December 1, Year 6, with interest payable each December 1 and June 1. The bonds sold for $5,194,770 to yield 16%. If the discount is amortized by the effective interest method, Marla, Inc.’s interest expense for the fiscal year ended November 30, Year 2 related to its $6,000,000 bond issue will be 
A. $623,372
B. $720,000
C. $835,610
D. $881,046
E. $623,046

88. U.S. GAAP  and IFRS permit firms to account for notes and bonds under which of the following approach(es)?  
A. Amortized Cost.
B. Fair Value.
C. Amortized Cost and Future Value.
D. Non-amortized cost and Fair Value.
E. Amortized Cost and Fair Value.

89. The FASB and the IASB refer to the approach that uses the current market interest rate instead of the historical market interest rate to discount the remaining cash flows from financial instruments as the 
A. future value option. 
B. current value option. 
C. liquidation value option. 
D. fair value option. 
E. accurate value option.

90. A firm that does not account for long-term notes and bonds using the fair value option, uses the _____ to account for the loan while it is outstanding.  
A. present and future market interest rates
B. future market interest rates
C. fair market interest rates
D. historical market interest rate
E. current market interest rate