# Accounting Help for homework

Question 1:

a.  Bolton  Corporation bought a new machine on January 1, 2014 and agreed to pay for it in 5 equal installments of \$40,000 on December 31st, 2014 and December 31 of each of the next 4 years.  Assuming that the prevailing rate of 8% applies to this contract, how much should Bolton record as the cost of the machine?

b. Prepare the entry that Bolton would make to record the purchase of the machinery if the company signed a note where interest was included in the face amount of the note.

c. Prepare the entry or entries required for the first payment.

d. How will Bolton’s note appear on the December 31st, 2014 balance sheet? Include the section of the balance sheet and the presentation, with numbers.

2. Refer to question 1.  Answer each question again, assuming that interest was not included in the face amount of the note.

a. Cost of the machine

b. Journal entry to record the purchase

c. Entry or entries required for the first payment.

d. Presentation of note on December 31, 2014 balance sheet.

Question 2:

Johns Co. is issuing \$7.5 million 12% bonds in a private placement on July 1, 2014. Each \$1,000 bond pays interest semi-annually on December 31 and June 30 of each year. The bonds mature in ten years. At the time of issuance, the market interest rate for similar types of bonds was 8%.

a.   What is the expected selling price of the bonds?

b. Prepare the journal entry that Johns Co. will make when the bonds are issued.

c. The bond indenture agreement requires that Johns Co. deposit money in a bond sinking fund semi annually beginning on the first interest payment date.  The controller estimates that the annual rate of interest earned on the investments in the sinking fund will be 8%.  What amount must be deposited annually in order to have enough money in the fund to pay off the bonds in 10 years?

d. Prepare an amortization schedule to prove that your answer in d is correct. Cut and paste the schedule below. PLACE YOUR AMORTIZATION SCHEDULE AT THE END OF THE QUIZ.

e. Prepare the entry that will be made each year to record the payment to the sinking fund.