11.On January 1, 2007 Healing Health Food Stores issued $400,000 face value of five-year, annual bonds. The stated rate was 12% and on the date of sale, the market rate is 10%.
Required:
a.Will these bonds sell at face value, above, or below? Why?
b.Determine the selling price of these bonds. Show your work. If you can't solve this part of the problem, merely make up an answer, write it in the space below, and use that answer as the basis for your answer to part (c) below.
c.What amount will be reported on the year-end 2007 income statement for the first year's interest expense?
d.What amount will be reported on the year-end 2007 statement of cash flows for the interest on these bonds?
12.Velox Corporation borrowed $200,000 at 10% annual interest. The loan is to be repaid in three equal year-end installments.
Required:
a.Determine the size of the required payments.
b.Complete the amortization table below:
YearBeginning
Principal
PaymentInterest
ExpensePrincipal
RepaidEnding
Principal
1
2
3