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293 − Assignment #7

Question 1: Problem 11-3 Question 2 It is now January 1, 2013, and Cartoons Limited is considering a $10 million share issue. The company would like to improve its debt/equity ratio before proceeding with the issue. Cartoons’ Chief Financial Officer has suggested to the board of directors that the company could retire its $5 million of 9%, 10-year bonds. Currently, interest rates have risen, and therefore the bonds could be retired at 99. The bonds were issued when the yield was 8%, and pay interest semi-annually on June 30 and December 31. The bonds will mature on June 30, 2014. Cartoons Limited’s accounting policy is to amortize any bond premium or discount using the effective interest method. The board of directors would like to know what the journal entry would be if the bonds were retired immediately on January 1, 2013. Question 3: Problem 11-10


1 Issue price of bonds = $__________________ SHOW YOUR WORK: Req. 2 Debit Credit Req. 2011: Debit Credit Calculations: . 2011: Debit Credit Calculations: December 31. 3 June 30.First): ________________________ STUDENT NO: _______________ P11–3 Req.293−ASSIGNMENT #7 NAME(Last.

2011 as follows: Question 2 1/1/2011 Debit Credit SHOW YOUR WORK: .June 30. 2012: Debit Credit Calculations: Req. 4 Interest Expense for 2011 = $___________________ Calculations: Bonds Payable reported on the Balance Sheet (Statement of Financial Position) on December 31.

Total cash outflow through the maturity date. Unamortized discount. Cash inflow at the date of issue (sale). 7 percent. net of income tax (25%). Income statement for 2012 Bond interest expense. 1 WHERE APPLICABLE. f. i. SHOW YOUR WORK in this column. g. Balance Sheet at December 31. CLEARLY show how you came up with your “numbers”. h.P11–10 You do NOT have to do Requirement 2. d. Case A (Par) Case B (at 98) Case C (at 102) b. . 2012 Bonds Payable. Unamortized premium. Req. Total interest expense. a. Net cash outflow = total interest expense over the life of the bonds. Net liability. c. e.