Problem 6

1 9 3/4% registered debentures, callable in 2002, due in 2007 700,000

9 1/2% collateral trust bonds, convertible into common stock
beginning in 2000, due in 2010 600,000
D 1,300,000

2 Serial Bonds
9.375% registered bonds (25,000 maturing annually
beginning in 20x4 275,000
10.0% commodity backed bonds (50,000 maturing annually
beginning in 20x5 200,000
A 475,000

Debenture Bonds
9.375% registered bonds (25,000 maturing annually
beginning in 20x4 275,000
11.5% convertible bonds, callable beginning in 20x9, due 2010 125,000
A 400,000

3 Promotion Costs 20,000

Engraving and Printing 25,000
Underwriters' Commission 200,000
D 245,000

4 Present value x Effective Interest Rate x Number of period

103,288 x 10% x 6/12 C 5,164
 Date Interest Interest Amortization Present
5 Payments Expense Value
1/2/2001 469,500
6/30/2001 22, 500 23,475 975 470,475

Answer: B. 470,475

6 Face Amount 1,000,000

Less: Carrying Amount (Oct 31, 1999) 1,062,000
Unamortized bond premium A 62,000

7 Bond Proceeds 190,280

Less: Present value due in 12/31/x1 50,900
Carrying amount A 139,380

8 800,000 x 4% x 2/6 D 10,667

9 Face amount 200 x 1000 shares 200,000

Cash proceeds 200 x 101% 202,000

Cash proceeds including accrued interest 202,000

Less: Accrued interest sold
200,000 x 9% x 5/12 7,500
A 194,500

10 D. 700