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SteveS, Banker
Category: Finance
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Experience:  MBA from Top 5 US Business School, Investment Banking Professional
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1. - How would the carrying value of a bond payable be affected

Customer Question

1. -   How would the carrying value of a bond payable be affected by amortization of each of the following?
             &nbs p;          Discount                      Premium
A.                    No effect                      No effect
B.&nb sp;                   Increase                         No effect
C.             &nbs p;      Increase                         Decrease
D.                     Decrease                        Increase

2. -   On January 1, 2007, Felipe Hospital issued a $250,000, 10% 5 year bond for $231,601 interest is payable on June 30 and December 31, Felipe uses the effective interest method to amortize all premiums and discounts. Assuming an effective interest rate of 12%, approximately how much discount will be amortized on December 31, 2007?
A. $2,230               B. $ 1,480       B. 1,396           D. $987

3.- On February 24, BMC Company purchased 4,000 shares o Winn Corp newly issued 6% cumulative $ 75 par preferred stock for $ 304,000. Each share carried one detachable stock warrant entitling the holder to acquire at $10 one share of Winn no-par common stock. On February 25, the market price of the preferred stock ex-warrants was $ 72 per share, and the market price of the stock warrants was $ 8 per warrant. On December 29, BMC sold all the stock warrants for $ 41,000. The gain on the sale of the stock warrants was    A. $0    B. $ 1,000     C. $ 9,000      D. $ 10,600

4. - On June 30, 2007 Country inc had outstanding 10%, $ 1,000,000 face amount, 15 year bonds maturing on June 30, 2012. Interest is paid on June 30 and December 31, and bond discount and bond issue costs are amortized on theses dates. The unamortized balances on June 30, 2007, of bond discount and bond issue costs were $ 55,000 and $ 20,000 respectively. Country reacquired all of these bonds at 96 on June 30, 2007, and retired them. Ignoring income taxes, how much gain or loss should Country record on the bond retirement?    A. Loss of $ 15,000   B. Loss of $ 35,000 C. Gain of $ 5000     D. gain of $ 40,000
Submitted: 8 years ago.
Category: Finance
Expert:  SteveS replied 8 years ago.

Here are the solutions.

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Expert:  SteveS replied 8 years ago.

I made an update to #3. Please download the solution xls again. Thanks.


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