ACCT551 Week 3 Quiz

1. (TCO D) The printing costs and legal fees associated with the issuance of bonds should (Points : 5) be expensed when incurred. be reported as a deduction from the face amount of bonds payable. be accumulated in a deferred charge account and amortized over the life of the bonds. not be reported as an expense until the period in which the bonds mature or are retired.

Question 2. 2. (TCO D) A debt instrument with no ready market is exchanged for property whose fair market value is currently indeterminable. When such a transaction takes place, (Points : 5) the present value of the debt instrument must be approximated using an imputed interest rate. it should not be recorded on the books of either party until the fair market value of the property becomes evident. the board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction. the directors of both entities involved in the transaction should negotiate a value to be assigned to the property.

Question 3. 3. (TCO D) On January 1, 2010, Ellison Co. issued 8-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are as follows: Present value of one for eight periods at 6% .627 Present value of one for eight periods at 8% .540 Present value of one for 16 periods at 3% .623 Present value of one for 16 periods at 4% .534 Present value of annuity for eight periods at 6% 6.210 Present value of annuity for eight periods at 8% 5.747 Present value of annuity for 16 periods at 3% 12.561 Present value of annuity for 16 periods at 4%