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Vsevolod [243]
3 years ago
12

On January 1, Pacer Corporation issued $2,000,000, 13%, 5-year bonds with interest payable on July 1 and January 1. The bonds so

ld for $2,197,080. The market rate of interest for these bonds was 11%. On the first interest date, using the effective-interest method, the debit entry to Interest Expense is for Select one: a. $260,000. b. $130,000. c. $142,810. d. $241,679. e. $120,839.
Business
1 answer:
wel3 years ago
7 0

Answer:

Option E, is correct as effective interest $ 120,839

Explanation:

The coupon interest payable semi-annually is computed thus:

Semi-annual coupon =13%/2*$2000000

                                  =$130,000

However the bond was issued at  premium, using effective interest the first interest payment is calculated on the actual issue value of the bond of $2,197,080 using the market rate of interest

effective interest=11%/2*$2,197,080

                           =$ 120,839.40  

Hence,the interest expense based on effective interest is  $120,839 rounded to the nearest whole number

Option D is wrong because the effective interest is a semi-annual interest not an annual one.

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(2,100,000 *65) /100 = $1,365,000

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Ari does not like conflict and will often let his employees get away with inappropriate behavior on the job. Ari would most likely be considered a <u>country club manager.</u>

<h3>What is a country club manager's style?</h3>

A country club manager's leadership depicts a manager who scores low on productivity but high on concern for people.

Country club managers are attentive to the:

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Thus, Ari does not like conflict and will often let his employees get away with inappropriate behavior on the job. Ari would most likely be considered a <u>country club manager.</u>

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