B-13.01On April 1, 20X4, Rojas purchased land by giving $100,000 in cash and executing a $400,000 note payable to the former owner. The note bears interest at 10% per annum, with interest being payable annually on March 31 of each year. Rojas is also required to make a $100,000 payment toward the note's principal on every March 31.(a)Prepare the appropriate journal entry to record the land purchase on April 1, 20X4.(b)Prepare the appropriate journal entry to record the year-end interest accrual on December 31, 20X4.(c)Prepare the appropriate journal entry to record the payment of interest and principal on March 31, 20X5.(d)Prepare the appropriate journal entry to record the year-end interest accrual on December 31, 20X5.(e)Prepare the appropriate journal entry to record the payment of interest on March 31, 20X6. &R&"Myriad Web Pro,Bold"&20B-13.01 B-13.01 Worksheet B-13.01(a), (b), (c), (d), (e)GENERAL JOURNALDateAccountsDebitCredit04-01-X412-31-X403-31-X512-31-X503-31-X6 &L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-13.01 B-13.01 B-13.02Review the discussion on future value from the textbook, and complete the following requirements (you will find it helpful to access the future value tables hyper-linked within the online version of the textbook).(a)Prepare basic calculations showing how much a lump sum of $10,000 invested at 7% per year will become after 6 years. For this requirement, do not refer to the future value table.(b)Verify your answer to part (a) by utilizing the appropriate future value factor from the applicable table.(c)Construct a table of basic calculations showing how much $10,000 invested every year (as of the beginning of each year) at 7% per year will become after 6 years. For this requirement, you may refer to the future value table for $1 (but do not utilize the annuity table).(d)Verify your answer to part (c) by utilizing the annuity future value factor from the applicable table. B-13.02 Worksheet B-13.02(a) 7% interest, and 6 periods:(b) 7% interest, and 6 periods:The future value factor from the table is(c)Year of InvestmentFuture Value Factor From TablePaymentValue of Payment at end of 6th Year1 (amount will be invested 6 years)$10,000$ - 02 (amount will be invested 5 years)$10,000- 03 (amount will be invested 4 years)$10,000- 04 (amount will be invested 3 years)$10,000- 05 (amount will be invested 2 years)$10,000- 06 (amount will be invested 1 year)$10,000- 0$ - 0(d) 7% interest, and 6 periods:The future value factor from the annuity table is B-13.01 The formula in excel is: = 10000 * 1.07 ^ 6 Note the symbol (^) that is used to raise a value to a power B-13.03Review the discussion on present value from the textbook, and complete the following requirements (you will find it helpful to access the present value tables hyper-linked within the online version of the textbook).(a)Prepare basic calculations showing the current value of a $25,00 ...

1. B-13.01On April 1, 20X4, Rojas purchased land by giving
$100,000 in cash and executing a $400,000 note payable to the
former owner. The note bears interest at 10% per annum, with
interest being payable annually on March 31 of each year.
Rojas is also required to make a $100,000 payment toward the
note's principal on every March 31.(a)Prepare the appropriate
journal entry to record the land purchase on April 1,
20X4.(b)Prepare the appropriate journal entry to record the
year-end interest accrual on December 31, 20X4.(c)Prepare the
appropriate journal entry to record the payment of interest and
principal on March 31, 20X5.(d)Prepare the appropriate journal
entry to record the year-end interest accrual on December 31,
20X5.(e)Prepare the appropriate journal entry to record the
payment of interest on March 31, 20X6.
&R&"Myriad Web Pro,Bold"&20B-13.01
B-13.01
Worksheet B-13.01(a), (b), (c), (d), (e)GENERAL
JOURNALDateAccountsDebitCredit04-01-X412-31-X403-31-
X512-31-X503-31-X6
&L&"Myriad Web Pro,Bold"&12Name:
Date: Section: &R&"Myriad Web
Pro,Bold"&20B-13.01
B-13.01
B-13.02Review the discussion on future value from the
textbook, and complete the following requirements (you will
find it helpful to access the future value tables hyper-linked
within the online version of the textbook).(a)Prepare basic
calculations showing how much a lump sum of $10,000 invested
at 7% per year will become after 6 years. For this requirement,
do not refer to the future value table.(b)Verify your answer to
part (a) by utilizing the appropriate future value factor from the
applicable table.(c)Construct a table of basic calculations
showing how much $10,000 invested every year (as of the

2. beginning of each year) at 7% per year will become after 6
years. For this requirement, you may refer to the future value
table for $1 (but do not utilize the annuity table).(d)Verify your
answer to part (c) by utilizing the annuity future value factor
from the applicable table.
B-13.02
Worksheet B-13.02(a) 7% interest, and 6 periods:(b) 7%
interest, and 6 periods:The future value factor from the table
is(c)Year of InvestmentFuture Value Factor From
TablePaymentValue of Payment at end of 6th Year1 (amount
will be invested 6 years)$10,000$ - 02 (amount will be
invested 5 years)$10,000- 03 (amount will be invested 4
years)$10,000- 04 (amount will be invested 3 years)$10,000- 05
(amount will be invested 2 years)$10,000- 06 (amount will be
invested 1 year)$10,000- 0$ - 0(d) 7% interest, and 6
periods:The future value factor from the annuity table is
B-13.01
The formula in excel is:
= 10000 * 1.07 ^ 6
Note the symbol (^) that is used to raise a value to a power
B-13.03Review the discussion on present value from the
textbook, and complete the following requirements (you will
find it helpful to access the present value tables hyper-linked
within the online version of the textbook).(a)Prepare basic
calculations showing the current value of a $25,000 sum to be
received in 4 years. You may assume that 6% is the appropriate
discount rate. For this requirement, do not refer to the present
value table.(b)Verify your answer to part (a) by utilizing the
appropriate present value factor from the applicable
table.(c)Construct a table of basic calculations showing how
much an annuity of $25,000 received at the end of each year for
four years is worth today. Assume a 6% discount rate. For this
requirement, you may refer to the present value table for $1
(but, do not utilize the annuity table).(d)Verify your answer to

3. part (c) by utilizing the annuity present value factor from the
applicable table.
B-13.03
Worksheet B-13.03(a) 6% interest, and 4 periods:(b) 6%
interest, and 4 periods:The present value factor from the table
is(c)YearPresent Value Factor From TablePaymentValue of
Payment at beginning of 1st Year1 (amount will be received in
1 year)$25,000$ - 02 (amount will be received in 2
years)$25,000- 03 (amount will be received in 3 years)$25,000-
04 (amount will be received in 4 years)$25,000- 0$ - 0(d)
6% interest, and 4 periods:The present value factor from the
annuity table is
B-13.03
The formula in excel is:
= 25000 * (1/1.06 ^ 4)
Note the symbol (^) that is used to raise a value to a power
B-13.04On January 1, 20X5, Juan Silvia borrowed $500,000 to
purchase a new office building. The loan is to be repaid in 2
equal annual payments, beginning December 31, 20X5. The
annual interest rate on the loan is 9%.(a)Calculate the annual
payment on the loan.(b)Prepare the appropriate journal entries
to record the loan and subsequent payments at the end of 20X5
and 20X6.(c)If the loan was to be repaid in 24 equal monthly
payments (0.75% interest rate per month), how much would the
monthly payment equal?
B-13.04
Worksheet B-13.04(a)Loan Amount = Payments X Annuity
Present Value Factor(b)GENERAL
JOURNALDateAccountsDebitCredit1-
JanBuilding500,000.00Note Payable500,000.00To record
purchase of office building for 9% note payable31-DecInterest
ExpenseNote PayableCashTo record payment31-DecInterest
ExpenseNote PayableCashTo record payment(c)Loan Amount =
Payments X Annuity Present Value Factor

4. B-13.04
B-13.05The contractual conditions of specific bond issues vary.
Therefore, it becomes important to understand exactly what is
meant by the terminology used to describe a bond agreement.
Every sentence in the following narrative contains a
misstatement. Mark up and correct the narrative. The blank
worksheet can be used to facilitate your answering this
question.The specific terms of a bond issue are specified in a
bond debenture. Secured bonds are backed up only by the
general faith and credit of the issuer. Computerization has
resulted in the virtual elimination of registered bonds. Serial
bonds must be matched with funds set aside in a fund to provide
for the eventual retirement of the issue. Callable bonds can be
exchanged for common stock of the issuer. Low-yield bonds of
distressed firms are frequently called junk bonds. Bonds will
sell at a premium when the effective rate is above the stated
rate.
B-13.05
Worksheet B-13.05The specific terms of a bond issue are
specified in a bond debenture.
Secured bonds are backed up only by the general faith and
credit
of the issuer. Computerization has resulted in the virtual
elimination of
registered bonds. Serial bonds must be matched with funds set
aside
in a fund to provide for the eventual retirement of the issue.
Callable
bonds can be exchanged for common stock of the issuer. Low-
yield

5. bonds of distressed firms are frequently called junk bonds.
Bonds will sell
at a premium when the effective rate is above the stated rate.
B-13.05
B-13.06Ace Brick company issued $100,000 of 5-year bonds.
The bonds were issued at par on January 1, 20X1, and bear
interest at a rate of 8% per annum, payable
semiannually.(a)Prepare the journal entry to record the bond
issue on January, 20X1.(b)Prepare the journal entry that Ace
would record on each interest date.(c)Prepare the journal entry
that Ace would record at maturity of the bonds.(d)How much
cash flowed "in" and "out" on this bond issued, and how does
the difference compare to total interest expense that was
recognized?
B-13.06
Worksheet B-13.06(a)(b)(c)GENERAL
JOURNAL DateAccountsDebitCreditIssueInterestMaturity(d)
B-13.06
B-13.07Horton Micro Chip Company issued $100,000 of face
amount of 6-year bonds on January 1, 20X1. The bonds were
issed at 103, and bear interest at a stated rate of 8% per annum,
payable semiannually. The premium is amortized by the
straight-line method.(a)Prepare the journal entry to record the
initial issue on January, 20X1.(b)Prepare the journal entry that
Horton would record on each interest date.(c)Prepare the journal
entry that Horton would record at maturity of the bonds.(d)How
much cash flowed "in" and "out" on this bond issue, and how
does the difference compare to total interest expense that was
recognized?
B-13.07
Worksheet B-13.07(a)(b)(c)GENERAL
JOURNAL DateAccountsDebitCreditIssueInterestMaturity(d)
B-13.07
B-13.08Erik Food Supply Company issued $100,000 of face
amount of 4-year bonds on January 1, 20X1. The bonds were

6. issued at 98, and bear interest at a stated rate of 8% per annum,
payable semiannually. The discount is amortized by the
straight-line method.(a)Prepare the journal entry to record the
initial issuance on January, 20X1.(b)Prepare the journal entry
that Erik would record on each interest date.(c)Prepare the
journal entry that Erik would record at maturity of the
bonds.(d)How much cash flowed "in" and "out" on this bond
issue, and how does the difference compare to total interest
expense that was recognized?
B-13.08
Worksheet B-13.08(a)(b)(c)GENERAL
JOURNAL DateAccountsDebitCreditIssueInterestMaturity(d)
B-13.08
B-13.09Standard Atlantic Shipping issued $5,000,000, face
amount, of 7% bonds on January 1, 20X3. The bonds are 5-year
bonds, and Interest is payable every 6 months. At the time of
issue, the market rate of interest was only 6%, so the bonds
were issued at a premium.(a)Prepare calculations showing that
issue price was approximately $5,213,235.(b)Use the effective-
interest method of amortization, and prepare the journal entries
that Standard Atlantic Shipping would record on January 1,
20X3, June 30, 20X3, and December 31, 20X3.(c)Show how the
bonds would appear on Standard Atlantic Shipping's December
31, 20X3 balance sheet.
B-13.09
Worksheet B-13.09(a)(b)GENERAL
JOURNAL DateAccountsDebitCredit1-Jan30-Jun31-
Dec(c)Bonds payablePlus: Premium on bonds payable
B-13.09
B-13.10Standard Pacific Shipping issued $5,000,000, face
amount, of 5% bonds on January 1, 20X3. The bonds are 5-year
bonds, and Interest is payable every 6 months. At the time of
issue, the market rate of interest was 6%, so the bonds were
issued at a discount.(a)Prepare calculations showing that issue
price was approximately $4,786,725.(b)Use the effective-
interest method of amortization, and prepare the journal entries

7. that Standard Pacific Shipping would record on January 1,
20X3, June 30, 20X3, and December 31, 20X3.(c)Show how the
bonds would appear on Standard Pacific Shipping's December
31, 20X3 balance sheet.
B-13.10
Worksheet B-13.10(a)(b)GENERAL
JOURNAL DateAccountsDebitCredit1-Jan30-Jun31-
Dec(c)Bonds payableLess: Discount on bonds payable
B-13.10
B-13.11My Chase is devoted to tracking the performance of
amateur athletes. The company issued $1,000,000 face amount
of 9% bonds. The bonds were dated January 1, 20X4, and pay
interest on June 30 and December 31 of each year. The initial
bond offering was delayed until March 1, 20X4, and the issue
price was 100 plus accrued interest.(a)Prepare the journal entry
to record the bond issue on March 1, 20X4.(b)Prepare the
journal entry that My Chase would record on June 30,
20X4.(c)Prepare the journal entry that My Chase would record
on December 31, 20X4.
B-13.11
Worksheet B-13.11(a)(b)(c)GENERAL
JOURNAL DateAccountsDebitCredit1-Mar30-Jun31-Dec
B-13.11
B-13.12Clear Water Coffee issued $100,000 of 7% bonds on
January 1, 20X1. The bonds were issued at par and pay interest
on June 30 and December 31 of each year. By December 31,
20X5, the market rate of interest had increased, and Clear Water
was able to reacquire and retire the bonds for $97,500, plus
accrued interest.Prepare the journal entry to record the interest
payment and bond retirement on December 31, 20X5.
B-13.12
Worksheet B-13.12GENERAL
JOURNAL DateAccountsDebitCredit31-Dec31-Dec
B-13.12
B-13.13Jacob Joseph has identified five different companies in
which he is interested in investing, based upon their products

8. and prospects. However, Jacob is concerned about a general
economic downturn and desires to invest in companies with the
lowest debt exposure. Following is a list of the data for the five
potential investments. Jacob has compiled the data and has
ranked the companies based upon total debt. He has requested
your help in evaluating the risk profiles for each company.To
complete your evaluation, you need to know that each company
faces an income tax rate that is equivalent to 30% of income
before taxes (which also means that net income is 70% of
income before taxes). In addition, assume that each company
incurs an average interest cost that is 8% of total debt.Total
AssetsTotal LiabilitiesNet IncomeA$ 10,000,000$ 1,000,000$
200,000B20,000,0003,000,0001,000,000C6,000,0004,000,00025
0,000D15,000,0006,000,0001,600,000E30,000,00022,000,0004,
000,000(a)Calculate the debt to total asset ratio, and reorder the
list from least risky to most risky, based upon that
ratio.(b)Calculate the debt to equity ratio, and reorder the list
from least risky to most risky, based upon that
ratio.(c)Calculate the times interest earned ratio, and reorder the
list from least risky to most risky, based upon that ratio.(d)Do
the ratios suggest that risk is a function of total debt, or other
factors? Do all the ratios produce the same signals?
B-13.13
Worksheet B-13.13(a)Total AssetsTotal LiabilitiesTotal Debt/
Total Assets(b)Total AssetsTotal LiabilitiesTotal Equity
(Assets - Liabilities)Total Debt/
Total Equity(c)Net IncomeIncome Before Tax
(Net income/
70%)Interest Expense
(Total Liabilities X 8%)Income Before Tax and InterestIncome
Before Interest and Tax/
Interest
B-13.13
B-13.14Mike Davis Company entered into two lease
agreements. One lease was for office space and the other was
for office equipment.The office space lease is not a capital

9. lease. It is an operating lease because the risks and rewards of
owning the property remain with the lessor (owner of the
property). The lease agreement is for 5 years and provides for
monthly payments of $2,500. These rent payments are charged
to rent expense as incurred. No liability is recorded for the
lease contract.The office equipment lease is a capital lease.
This lease is also for 5 years. Payments at the end of each
month are $2,500, and their present value at the inception of the
lease is $112,388. The interest rate implicit in the lease is 1%
per month.(a)Prepare the journal entry needed to record a
payment under the office space lease.(b)Prepare the initial
journal entry to record the office equipment lease.(c)Prepare the
journal entries necessary to record the first and second
payments under the office equipment lease.(d)Assuming
straight-line depreciation over 60 months, prepare the journal
entry to record monthly depreciation of the office
equipment.(e)How would the financial reporting differ for the
office space versus the office equipment?
B-13.14
Worksheet B-13.14(a)(b)(c)(d)GENERAL
JOURNAL DateAccountsDebitCredit(a)(b)(c)(d)(e)
B-13.14
I-13.03 On January 1, 20X2, Paisley Corporation issued
$2,000,000 face amount of 6% bonds. These bonds are dated
January 1, and mature in 6 years, with semiannual interest
payments. The market rate of interest at the time of issue was
5%, and the bonds priced at $2,102,578. Paisley uses the
effective-interest method of amortization.(a)Prepare a 6-year
amortization table for Paisley's bonds.(b)Prepare 20X2's entries
for these bonds; specifically, the initial bond issuance, the June
30 interest payment, and the December 31 interest
payment.(c)Demonstrate the appropriate balance sheet
presentation for the bonds, as of December 31, 20X4.
I-13.03
Worksheet I-13.03 (a)(b)GENERAL
JOURNAL DateAccountsDebitCreditPeriod

10. EndingBeginning of Period
Net Book Value
of Bonds PayableInterest Expense
(Net Book Value
X 5% X 6/12)Amount of
PaymentPremium Amortization
(payment minus expense)End of Period
Net Book Value
(beginning balance less amortization)1-Jan6-30-X2$
2,102,57812-31-X26-30-X312-31-X36-30-X430-Jun12-31-X46-
30-X512-31-X56-30-X612-31-X631-Dec6-30-X712-31-
X7(c)Bonds payable$ -Plus: Unamortized premium on bonds
payable-$ -
I-13.03(a)
I-13.03(b)(c)
I-13.04On January 1, 20X3, Daisy Corporation issued
$5,000,000 face amount of 6% bonds. These bonds are dated
January 1, and mature in 5 years, with semiannual interest
payments. The market rate of interest at the time of issue was
7%, and the bonds priced at $4,792,085. Daisy uses the
effective-interest method of amortization.(a)Prepare a 5-year
amortization table for Daisy's bonds.(b)Prepare 20X3's entries
for these bonds; specifically, the initial bond issuance, the June
30 interest payment, and the December 31 interest
payment.(c)Demonstrate the appropriate balance sheet
presentation for the bonds, as of December 31, 20X5.
I-13.04
Worksheet I-13.04(a)(b)GENERAL
JOURNAL DateAccountsDebitCreditPeriod
EndingBeginning of Period
Net Book Value
of Bonds PayableInterest Expense
(Net Book Value
X 7% X 6/12)Amount of
PaymentDiscount
Amortization

11. (expense minus payment)End of Period
Net Book Value
(beginning balance plus amortization)1-Jan6-30-X3$
4,792,08512-31-X36-30-X412-31-X46-30-X530-Jun12-31-X56-
30-X612-31-X66-30-X712-31-X731-Dec(c)Bonds payable$ -
Less: Unamortized discount on bonds payable-$ -
I-13.04(a)
I-13.04(b)(c)