You are the new controller for Moonlight Bay Resorts. Thecompany CFO has asked you to determine the companyâs interestexpense for the year ended December 31, 2016. Your accounting groupprovided you the following information on the company's debt (FV of$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.)
1. On July 1, 2016, Moonlight Bay issued bonds with a face amountof $1,500,000. The bonds mature in 15 years and interest of 11% ispayable semiannually on June 30 and December 31. The bonds wereissued at a price to yield investors 12%. Moonlight Bay recordsinterest at the effective rate.
2. At December 31, 2015, Moonlight Bay had a 10% installment notepayable to Third Mercantile Bank with a balance of $620,000. Theannual payment is $120,000, payable each June 30.
3. On January 1, 2016, Moonlight Bay leased a building under acapital lease calling for four annual lease payments of $45,000beginning January 1, 2016. Moonlight Bayâs incremental borrowingrate on the date of the lease was 10% and the lessorâs implicitrate, which was known by Moonlight Bay, was 9%.
Required:
Calculate interest expense for the year ended December 31,2016.
You are the new controller for Moonlight Bay Resorts. Thecompany CFO has asked you to determine the companyâs interestexpense for the year ended December 31, 2016. Your accounting groupprovided you the following information on the company's debt (FV of$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.) |
| 1. | On July 1, 2016, Moonlight Bay issued bonds with a face amountof $1,500,000. The bonds mature in 15 years and interest of 11% ispayable semiannually on June 30 and December 31. The bonds wereissued at a price to yield investors 12%. Moonlight Bay recordsinterest at the effective rate. |
| 2. | At December 31, 2015, Moonlight Bay had a 10% installment notepayable to Third Mercantile Bank with a balance of $620,000. Theannual payment is $120,000, payable each June 30. |
| 3. | On January 1, 2016, Moonlight Bay leased a building under acapital lease calling for four annual lease payments of $45,000beginning January 1, 2016. Moonlight Bayâs incremental borrowingrate on the date of the lease was 10% and the lessorâs implicitrate, which was known by Moonlight Bay, was 9%. |
| Required: |
Calculate interest expense for the year ended December 31,2016. |
Related questions
Universal Foods issued 12% bonds, dated January 1, with a faceamount of $225 million on January 1, 2016. The bonds mature onDecember 31, 2025 (10 years). The market rate of interest forsimilar issues was 14%. Interest is paid semiannually on June 30and December 31. Universal uses the straight-line method. (FV of$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.) |
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| 1. | Determine the price of the bonds at January 1, 2016.(Enter your answer in whole dollars.) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 5. | What is the amount(s) related to the bonds that Patey willreport in its balance sheet at December 31, 2016? ////////////
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| PLEASE ANSWER ALL BLANKS On June 30, 2016, Singleton Computers issued 9% stated ratebonds with a face amount of $200 million. The bonds mature on June30, 2031 (15 years). The market rate of interest for similar bondissues was 8% (4.0% semiannual rate). Interest is paid semiannually(4.5%) on June 30 and December 31, beginning on December 31, 2016.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of$1) (Use appropriate factor(s) from the tablesprovided.) |
| Required: | ||||||||||||||||||||||||||||||||||||||||||||||
| 1. | Determine the price of the bonds on June 30, 2016.
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Werner Chemical, Inc., leased a protein analyzer on September30, 2016. The five-year lease agreement calls for Werner to makequarterly lease payments of $371,971, payable each September 30,December 31, March 31, June 30, with the first payment at September30, 2016. Werner's incremental borrowing rate is 12%. Depreciationis recorded on a straight-line basis at the end of each fiscalyear. The useful life of the equipment is five years. (FV of $1, PVof $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tablesprovided.) |
| Required: |
| 1. | Determine the present value of the lease payments at September30, 2016. |
2. What amounts related to the lease wouldWerner report in its balance sheet at December 31, 2016 (ignoretaxes)?
liability:
assett:
3. What amounts related to the lease wouldWerner report in its income statement for the year ended December31, 2016 (ignore taxes)?
total expenses:
4.What amounts related to the lease wouldWerner report in its statement of cash flows for the year endedDecember 31, 2016 (ignore taxes)?
| Capital Lease | ||
| Interest Portion | ||
| Principal Portion |
