Bonds

On October 1, Snyder Technologies plans to sign a capital lease for machinery with a fair market value of $152,865 for a six-year period. The company will make the first of seven $27,865 annual payments when it signs the lease. The interest rate is 9 percent.

What is the amount of the liability generated by this capital lease?

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How much interest expense will Snyder incur in the first year of the lease?

Knoepfle Corporation’s bonds have a face value of $11,000,000 and a call price of 103. On February 1, 2012, the bonds have a carrying value of $11,200,000 on Knoepfle’s books and a market price of 98 3兾4 in the secondary market.

If Knoepfle wants to retire the entire bond issue, how much will it have to pay if it calls the bonds?

How much will it pay if it buys the bonds in the secondary bond market?

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