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1.ABC Inc. issued $10,000,000 worth of bonds on January 14, 2018. The bonds mature on December 31, 2022 and carry a coupon rate of 8% payable semi-annually on June 30 and December 31" of each year. A market interest rate of 6% was effective throughout 2018 Required: a) Were the bonds issued at a premium or a discount? b) Prepare all journal entries required during 2018. c) Assume that on January 1 2019, ABC decided to retire half of the bonds for $5,200,000 in cash. Prepare the required journal entry. General Journal Account Titles and Explanation Debit Date Dee 2. Jensen Corp. purchased a container load of antiques for resale at an invoice cost of $950,000. The goods were paid for when they were shipped in early January. The payment was financed through general borrowing. The container arrived in Canada at the end of June, and then at Jensen's location, by rail, at the beginning of August. Jensen had to refurbish some of them which took the months of August and September. The refurbishing costs incurred were $100,000, which were also financed. As of October 1st, the goods were available for sale. Transportation costs of $98,000 were paid in cash in October. Jensen has recorded $169,000 of total interest expense from $2,600,000 of general borrowing over the year. Required: Compute the amount of interest that can be capitalized by Jensen related to the above. Show all your work and comment on any payments which are not capitalizable. 2 In 10 bra nd. 000 no 20 landan 3. On 1 January 2018, a borrower arranged a $2,980,000 three-year 3% bond payable, with interest paid annually each 31 December. There was an upfront fee of $83,461, which was deducted from the cash proceeds of the bond on 1 January 2018. The bond was issued at par. Required: a) What net amount is received on 1 January 2018? b) Calculate the effective interest rate associated with the loan. c) Calculate the interest expense reported by the borrower for each of the three years. (It may be easier to prepare an amortization table, although the table is not a required part of the answer.)

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