Charger Company\'s most recent balance sheet reports total assets of $31,097,000
ID: 2471677 • Letter: C
Question
Charger Company's most recent balance sheet reports total assets of $31,097,000, total liabilities of $18,247,000 and total equity of $12,850,000. The debt to equity ratio for the period is (rounded to two decimals): 0.59 1.70 0.41 0.70 1.42 Morgan Company issues 10%, 20-year bonds with a par value of $790,000 that pay interest semi-annually. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is: $71,100 $35,550 $39,500 A company issued 7%, 15-year bonds with a par value of $600,000 that pay interest semi-annually. The current market rate is 7%. The journal entry to record each semiannual interest payment is: Debit Bond Interest Expense $21,000; credit Cash $21,000 Debit Bond Interest Expense $42,000; credit Cash $42,000. Debit Bond Interest Expense $40,000; credit Cash $40,000 Debit Bond Interest Expense $550,000; credit Cash $550,000 No entry is needed, since no interest is paid until the bond is due. On January 1 of 2015, Parson Freight Company issues 9.0%, 10-year bonds with a par value of $2,900,000. The bonds pay interest semi-annually. The market rate of interest is 10.0% and the bond selling, price was $2,702,942. The bond issuance should be recorded as: Debit Cash $2,900,000; credit Bonds Payable $2,900,000. Debit Cash $2,702,942; credit Bonds Payable $2,702,942. Debit Cash $2,900,000; credit Bonds Payable $2,702,942; credit Discount on Bonds Payable $197,058. Debit Cash $2,702,942; debit Discount on Bonds Payable $197,058; credit Bonds Payable $2,900,000. Debit Cash $2,702,942; debit Interest Expense $197,058; credit Bonds Payable $2,900,000. A company issues 7% bonds with a par value of $156,000 at par on April 1, which is 4 months after the most recent interest date. The cash received for accrued interest on April 1 by the bond issuer is: $7,280 $910 $6,370 $1,820 $3,640 A company issues 9% bonds with a par value of $480,000 at par on April 1. The bonds pay interest semi-annually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is: $7,200 $21,000 $28,800 $14,400 $36,000Explanation / Answer
1.Debt Equity Ratio=$18,247,000/$12,850,000=1.42
2.Interest for semiannual payment=$790,000*10%/2=$39,500
3. A Interest=$600,000*7%/2=$21,000
4.D
5.Accrued Interest=$156,000*7%*4/12=$3,640
6.Interest=$480,000*9%*6/12=$21,600
7.Gain=$237,800-$230,000=$7,800
8.B
Interest=$130,000*9%=$11,700
Note payable=$33,422-$11,700=$21,722
9.D
10.Interest=$140,210*10%/2=$7,010.50