Ashford University Interest Expense and Lease Payments Calculations I need a solution to this question, just a short calculation. Do it in word. My friend has told me the answers are online in chegg and course hero, I dont know what is that. I have also attached sample solutions. Be quick and very accurate. I only have 3 hours, but I know it will not take you 30 minutes Question
Question #4 (30 marks)
This question consists of 3 independent sub-questions
1. (8 marks)
At t=0, a company issues a 4 year bond payable with a face value (principal) of $10,000. The
B/P pays coupons of $1,000 every year for the first 2 years (Year 1 and Year 2); the B/P pays
zero coupons for the last 2 years( for Year 3 and Year 4). Assume a discount rate of 10% per
year. Calculate to the nearest dollar
a. What interest expense, if any, is reported on Year 3 I/S? (3 marks)
b. Suppose the B/P is retired at the end of year 2 for $8,100. Prepare journal entries to record the
bonds payable retirement. Assume the coupon for year 2 has been paid. (5 marks) Hint: Don’t
forget the gain or loss on retirement.
2. SONG Company has outstanding bonds originally issued at a premium. During 2015, the
unamortized bond premium decreased from $12,978 to $10,935. Annual interest (coupon) paid
was $10,800. The market rate of interest was 12% when the bond was issued.
a. Interest expense for 2015 (3 marks)
b. The face value of the bond, to the nearest thousand (4 marks)
c. The coupon rate of the bond (3 marks)
3. (12 marks)
The lease payments from footnote disclosures of an operating lease
Lease payments ($)
Year 4 and after 4,125
Assume a 10% discount rate and a tax rate of 40%.
a. Calculate the PV of all the lease payments. (6 marks)
b. Complete the I/S figures.
Reported Adjustment Adjusted
INT(1-tax rate) 475
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