32.Determine the coupon rate of interest on the bonds. What does this amount represent?
33.Calculate the effective interest rate on these bonds. Why is this amount different than the coupon rate?
34.On January 1, 2009, Foresite Corporation issued a 10-year, 9%, $100,000 installment note payable. The payment on this note is $15,582 and is paid annually at year-end beginning December 31, 2009. How much total interest is paid over the loan period?
35.On January 1, 2009, Justin Corp. leased equipment under a five-year lease with payments of $20,000 on each December 31 of the lease period. The present value of the lease payments is $77,800, using a market interest rate of 9%. Justin depreciates its equipment straight-line over 5 years with zero salvage value. The capital lease criteria are met. Calculate depreciation expense for 2009.
36.On January 1, 2009, Denver Company leased equipment under a 5-year lease with payments of $5,000 on each December 31 of the lease term. The present value of the lease payments at a discount rate of 12% is $18,024. If the lease is considered a capital lease, what is the balance sheet value of the lease obligation on January 1, 2010?
37.Crawford Company conducts a lottery system for Mississippi. The agreement specifies that the lottery must be conducted on a not-for-profit basis. Crawford’s monthly sales of lottery tickets amounts to $1,400,000. Monthly operating expenses are $400,000, including a management charge of $30,000. The payment schedule for the guaranteed $1 million dollar payout for a winning lottery ticket is $100,000 immediately and $100,000 each year for the next 9 years. Crawford produced the following income statement as evidence of its not-for-profit status:
Ticket sales
|
$1,400,000
|
Expenses:
|
|
|
Payout expense
|
$1,000,000
|
|
|
Operating expenses
|
400,000
|
1,400,000
|
Net income
|
$ 0
|
|
|
|
|
A.If the market rate of interest is 4%, determine the present value of the $900,000 liability arising from the monthly winning lottery ticket.
B.Recalculate the income statement to reflect GAAP measurement of payout expense.