Explore BrainMass
Share

# Sinking Fund and Bond Questions

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Can you please provide the answer along with the explanition and/or calculations?

6. Sinking fund cash would be classified on the balance sheet at:
current asset
fixed asset
intangible asset
investment

13. Sinking fund cash would be classified as a current asset?
True or False

14. A corp issued \$100,000, 13%, 10 year bonds that pay interest semiannually. The market quote on the bonds was 94.8. How much cash was received when the bonds were sold?
94800
100000
70500
105400

15. Sinking fund income is reported in the income statement as
income from operations
extraordinary income
gain on sinking fund transactions
other income

20. Sinking fund investments would be classified on the balance sheet as
current asset
fixed asset
investment
intangile asset

21. Bonds payable has a balance of \$900,000 and discount on bonds has a balance of \$10,000. If the issuing corp redems the bonds at 98, what is the amount of gain or loss on redemption?
8000 gain
8000 loss
10000 loss
10000 gain

23. The interest rate specified in the bond indenture is called
discount rate
contract rate
market rate
effective rate

24. If \$4,000,000 of 12% bonds are issued at 101, the amount of cash received from the sale is
4040000
4000000
4080000
3960000

26. The special fund set aside to provide for the payment of bonds at maturity is called the sinking fund?
True or False

#### Solution Preview

6. Investment: Even if bonds mature in the current year, and even if the sinking fund consists strictly of cash, the sinking fund is considered to be an investment, not a current asset.

13. False: Based upon the response to #6, the answer to this question is false.

14. \$94,800: The market for bonds is quoted as a percentage of par value. In this case, the company is selling bonds with a par value of \$100,000 for 94.8 percent of that value. Thus, ...

#### Solution Summary

6. Sinking fund cash would be classified on the balance sheet at:
current asset
fixed asset
intangible asset
investment

13. Sinking fund cash would be classified as a current asset?
True or False

14. A corp issued \$100,000, 13%, 10 year bonds that pay interest semiannually. The market quote on the bonds was 94.8. How much cash was received when the bonds were sold?
94800
100000
70500
105400

15. Sinking fund income is reported in the income statement as
income from operations
extraordinary income
gain on sinking fund transactions
other income

20. Sinking fund investments would be classified on the balance sheet as
current asset
fixed asset
investment
intangible asset

21. Bonds payable has a balance of \$900,000 and discount on bonds has a balance of \$10,000. If the issuing corp. redeems the bonds at 98, what is the amount of gain or loss on redemption?
8000 gain
8000 loss
10000 loss
10000 gain

23. The interest rate specified in the bond indenture is called
discount rate
contract rate
market rate
effective rate

24. If \$4,000,000 of 12% bonds are issued at 101, the amount of cash received from the sale is
4040000
4000000
4080000
3960000

26. The special fund set aside to provide for the payment of bonds at maturity is called the sinking fund?
True or False

\$2.19

## Questions

1. What are the key features of a bond?

2. What are call provisions and sinking fund provisions? Do these provisions make bonds more or less risky?

3. How is the value of any asset whose value is based on expected future cash flows determined?

4. What is the yield to maturity on a 10-year, 9% annual coupon, \$1,000 par value bond that sells for \$887.00? That sells for \$1,234.20? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between rd and the bond's coupon rate?

5. What is reinvestment rate risk? Which has more reinvestment rate risk, a 1-year bond or a 10-year bond?

View Full Posting Details