Instructions:       Complete the problems below. This assignment can be completed in either: Microsoft Excel, Word, or hand-written and scanned in PDF format.

PART A. For problems 1-4: On January 1, the company issues $500,000 of ten-year, 8% bonds at 100. The bonds pay interest semi-annually on July 1 and January 1. Prepare journal entries for the following:

1.       Issuance of the bonds on January 1.

2.       Payment of interest on July 1.

3.       Accrual of January 1 interest on December 31.

4.       Payment of interest on January 1 accrued on December 31.

PART B. For problems 5-6: On January 1, the company issues $200,000 of two-year, 10% bonds at 105. The bonds pay interest annually on January 1.

5.       Prepare the journal entry for issuance on January 1.

6.       Compute the total cost of borrowing for the bonds.

PART C. For problems 7-8: On January 1, the company issues $300,000 in five-year, 5% bonds at 96. The bonds pay interest annually on January 1.

7.       Prepare the journal entry for issuance on January 1.

8.       Compute the total cost of borrowing for the bonds.

PART D. For problems 9-11: On January 1, the company issues $100,000 in two-year, 8% bonds at 95. The bonds pay interest annually on January 1.

9.       Prepare the journal entry assuming retirement at maturity.

10.   Prepare the journal entry assuming retirement one year before maturity.

11.   Prepare the journal entry assuming the bonds are converted into 10,000 shares of $5-par value common stock at maturity. The fair market value of the stock at the time of the conversion is $85,000.

PART E. For problems 12-13: On January 1, the company issues a $200,000, 5%, 30-year mortgage note for new land. The terms call for annual payments on January 1 of $13,010.

12.   Prepare the journal entry for the issuance of the mortgage.

13.   Prepare the journal entry for the accrual of the first payment on December 31.

PART F. For questions 14-15: Interest expense = $3,000.00; Total Assets = $25,000.00; Total Debt = $10,000.00; Net Income = $5,000; Income Taxes = $2,500.00

14.   Calculate percentage of debt to total assets

15.   Calculate times interest earned

PART G. For problems 16-20: Complete the following:

16.   The company enters into a capital lease for equipment on January 1. The present value of the payments is $50,000, which is the fair value of the equipment. Prepare the journal entry for the transaction.

–  20. List the four conditions that can result in a lease being classified as a capital lease