ACCOUNTINGOn January 1, 2018, White Water issues $600,000 of 7%bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 6% and the bonds issued at$644,632. 1. Using an amortization schedule, show that the bonds have a carrying value of $633,887 on December 31, 2020. 2. If the market interest rate increases to 8% on December 31, 2020, it will cost$568,311 to retire the bonds. Record the retirement of the bonds on December 31, 2020. ACCOUNTINGPearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company's products. The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements: a. The finished goods inventory on hand at the end of each month must be equal to 3,000 units of Supermix plus 20% of the next month's sales. The finished goofs inventory on June 30 is budgeted to be 10.000 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 54,000 cc of solvent H300. c. The company maintains no work in process inventories. A sales budget for Supermix for the last six months of the year follows:
$$
\begin{matrix}
\text{ } & \text{Budgeted Sales in Units}\\
\text{July} & \text{35.000}\\
\text{August} & \text{40.000}\\
\text{September} & \text{50.000}\\
\text{October} & \text{30.000}\\
\text{November} & \text{20.000}\\
\text{December} & \text{10.000}\\
\end{matrix}
$$
1. Prepare a production budget for Supermix for the months July, August, September, and October. 2. Examine the production budget that you prepared in requirement 1. Why will the company produce more units than it sells in July and August, and fewer units than it sells in September and October? 3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, rand for the quarter in total.