1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
ra1l [238]
1 year ago
8

On January 1 of this year, Avaya Corporation issued bonds with a face value of $ 2,000,000 and a coupon rate of 6 percent. The b

onds mature in five years and pay interest annually on December 31. When the bonds were sold, the annual market rate of interest was 7 percent. Avaya uses the effective-interest amortization method.
Required:
(b) What amount of interest expense should be recorded on December 31 of this year? December 31 of next year?
Business
1 answer:
ra1l [238]1 year ago
6 0

Bonds Payable amount reflected in balance sheet = $2192890

Face Value = $2000000

Coupon Rate = 10%

Maturity Period = 10 years

Number of compounding = 2

Interest = $2000000 * 10% * 6/12 = $100000

Period = 2 * 10 = 20

Maturity Value = Face Value = $2000000

Market Interest Rate semiannually = 0.085 / 2 = 0.0425

Market Value = Present Value of Future Cash Flows

= PV of Interest + PV of maturity value

= (Interest * PVAF (4.25%, 20)) + (Maturity Value * PVIF (4.25%, 20))

= (100000 * 13.29437) + (2000000 * 0.434989)

= $1329437 + $869978

= $2199415

Since market value is greater than face value, we can say that bonds are issued at a premium.

Premium = $2199415 - $2000000 = $199415

Journal Entry to record the issuance of bonds:

Cash a/c                                               Dr          $2199415

     To Bonds Payable a/c                                 $2000000                            

     To Premium on the issue of bonds            $199415

Bonds Payable amount is a liability account that carries the quantity owed to bondholders by way of the company. This account usually seems in the lengthy-term liabilities section of the stability sheet, on account that bonds usually mature in more than one year.

Learn more about Bonds Payable amount here: brainly.com/question/7158291

#SPJ4

You might be interested in
Whats the number to 911?
neonofarm [45]

i dont know, it could really be any thing tbh

8 0
2 years ago
Gentry Inc. purchased 90% of Gaspard Farms on January 5, 2019. During 2019, Gentry sold Gaspard Farms for $650,000 goods which h
Wewaii [24]

Answer:

$5572500

Explanation:

consolidated cost of goods sold for 2020 would be:

consolidated cost of goods sold = ( total of goods sold by bought company ) - ( intra-entity transfer ) + ( ending unrealized gross profit ) - ( beginning unrealized gross profit )

= ( 5400000 + 1200000 ) - ( 1000000 )+(1000000*20%)*20% - {(650000*15%)*(450000/650000)}

= 6600000 - 1040000 - ( 97500 * 45/65 )

= $5572500

3 0
3 years ago
The balance in Accounts Receivable at the beginning of the year amounted to $16,000. During the year, $64,000 of credit sales we
poizon [28]

Answer: $70,000

Explanation:

Accounts Receivable at the beginning of the year amounted to $16,000

During the year, $64,000 of credit sales were made to customers.

ending balance in Accounts Receivable amounted to $10,000, and uncollectible accounts expense amounted to $4,000,

The Amount to appear in the operating activities section of the cash flow statement is

$16,000+$64,000-$10,000= $70,000

8 0
3 years ago
Read 2 more answers
You are the manager of a firm that receives revenues of $40,000 per year from product X and $90,000 per year from product Y. The
Novosadov [1.4K]

Answer:

Have a good day today! You got this :)

7 0
2 years ago
U
oksian1 [2.3K]

The descriptions to cases that will possibility be addressed by a Trial Balance are:

  • can detect the accuracy of the accounting process(possible)
  • can help check whether the debit side is equal to the credit side(possible)
  • can help prepare the income statement(possible)
  • helps serve as a proof of the application of the double-entry system(not possible)
  • can help check whether a particular transaction has been completely omitted(not possible)

<h3>What is trial balance?</h3>

A trial balance can be regarded as  bookkeeping worksheet which contains the ledger that is arranged into  debit and credit account column .

Therefore, with trial balance, one can check whether the debit side is equal to the credit side.

learn more about trial balance at:brainly.com/question/24217989

#SPJ1

3 0
1 year ago
Other questions:
  • The first year they were offered, John wanted a tablet computer, but he did not know which one to choose. He waited until there
    11·1 answer
  • Juan works at Texas Burgers in El Paso and earns $8.00 per hour. His twin brother Felipe works in Mexico Burgers in Ciudad Juare
    14·1 answer
  • The following information relates to Oriole Company for the year 2020.
    8·1 answer
  • What is the relationship between saving and investing??
    12·1 answer
  • The unadjusted trial balance of Sketch Star Makers Inc., prepared as of December 31, 2018, includes the following account balanc
    7·1 answer
  • Marigold Corp. self-insures its property for fire and storm damage. If the company were to obtain insurance on the property, it
    9·1 answer
  • A Broker Price Opinion (BOP) and Competitive Market Analysis (CMA) are estimates of value created by real estate licensees for m
    10·1 answer
  • Which of the following persons trade for their own account on the floor of an options exchange?
    10·1 answer
  • Difference between luna and sol?​
    9·1 answer
  • If the present value of $280 paid one year from now is $250 what is the one-year discount factor?
    7·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!