complete the activities in the attachments 494554

Eye Openers 1. Describe the two distinct obligations incurred by a corporation when issuing bonds. 2. Explain the meaning of each of the following terms as they relate to a bond issue: (a) convertible, (b) callable, and (c) debenture. 3. If you asked your broker to purchase for you a 10% bond when the market interest rate for such bonds was 11%, would you expect to pay more or less than the face amount for the bond? Explain. 4. A corporation issues $9,000,000 of 9% bonds to yield interest at the rate of 7%. (a) Was the amount of cash received from the sale of the bonds greater or less than $9,000,000? (b) Identify the following terms related to the bond issue: (1) face amount, (2) market or effective rate of interest, (3) contract rate of interest, and (4) maturity amount. 5. If bonds issued by a corporation are sold at a premium, is the market rate of interest greater or less than the contract rate? 6. The following data relate to a $100,000,000, 12% bond issue for a selected semiannual interest period: Bond carrying amount at beginning of period $112,085,373 Interest paid during period 6,000,000 Interest expense allocable to the period 5,623,113 (a) Were the bonds issued at a discount or at a premium? (b) What is the unamortized amount of the discount or premium account at the beginning of the period? (c) What account was debited to amortize the discount or premium? 7. Assume that Smith Co. amortizes premiums and discounts on bonds payable at the end of the year rather than when interest is paid. What accounts would be debited and credited to record (a) the amortization of a discount on bonds payable and (b) the amortization of a premium on bonds payable? 8. When a corporation issues bonds at a discount, is the discount recorded as income when the bonds are issued? Explain. 9. Assume that two 30-year, 10% bond issues are identical, except that one bond issue is callable at its face amount at the end of five years. Which of the two bond issues do you think will…