Question

1. On January​ 1, 2018, bonds with a face value of $91,000 were sold. The bonds mature on January​ 1, 2028. The face interest rate is 8​%. The bonds pay interest semiannually on July 1 and January 1. The market rate of interest is 10​%. What is the market price of the bonds on January​ 1, 2018? The present value of​ $1 for 20 periods at 5​% is 0.377. The present value of an ordinary annuity of​ $1 for 20 periods at 5​% is 12.462. The present value of​ $1 for 20 periods at 4​% is 0.456. The present value of an ordinary annuity of​ $1 for 20 periods at 4​% is 13.59. (Round your final answer to the nearest​ dollar.)

2. On January​ 2, 2019, Kornis Corporation acquired equipment for $300,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $50,000. What is the balance in Accumulated Depreciation on December​ 31, 2019, if Kornis Corporation uses the double−declining−balance method of​ depreciation?

A.$120,000

B. $60,000

C.$50,000

D.$100,000

3. On January​ 2, 2019, Konrad Corporation acquired equipment for $760,000. The estimated life of the equipment is 5 years or 37,000 hours. The estimated residual value is $20,000. If Konrad Corporation uses the units of production method of​ depreciation, what will be the debit to Depreciation Expense for the year ended December​ 31, 2020, assuming that during this​ period, the asset was used 5,000 hours?

A.$100,000

B.$148,000

C.$102,703

D.$ 105,405

Answer 1

Market value of bond is comprised of two parts (1) present value of face price of the bond (2) present value of interest

Interest is paid semi annually (2 times a year) so total interest payment within period Jan 1 2018-Jan 1 2028 are 20 payments.

Rate per payment = 8%/2 = 4%

Market rate is 10% per year so, it will 5% per payment period.We will use 5% PV factor to find present value

Payments	PV factor of $1 at 5%	Present value
$91,000	0.377	$34,307($91,000*0.377)
$3,640($91,000*4%)	12.462	$45,361.68($3,640*12.462)
	Market price of bond on January 1,2018	$79,669(34,307+45,361.68)

Thus, market price of bond on January 1 2018 is $79,669