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exis [7]
3 years ago
10

A company issues $24900000, 5.8%, 20-year bonds to yield 6% on January 1, 2020. Interest is paid on June 30 and December 31. The

proceeds from the bonds are $24324441. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2020 balance sheet
Business
1 answer:
m_a_m_a [10]3 years ago
3 0

Answer:

$24,353,219

Explanation:

The bond is issued on discount when the bond issuance proceeds are less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.

Discount on the bond = Face value - cash proceeds = $24,900,000 - $24,324,441 = $575,559

According to straight line amortization

Discount charged in the period = $575,559 / 20 = $28,778 per year = $14,389 per six months

Cash payment of interest = $24,900,000 x 5.8% = $1,444,200 per year = $722,100 per six months

As on December 31, 2020, one year has passed since the bond is issued. We will calculate annual interest expense

Total Interest Expense = $1,444,200 + $28,778 = $1,472,978

Bond Carrying value will be the net of bond book value and un-adjusted discount balance.

Carrying value of Bond = 24,900,000 - (575,559 - 28,778) = $24,353,219

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Find common denominators. What you do to the denominator, you do to the numerator.

(2/5)(7/7) = 14/35

(3/7)(5/5) = 15/35

14/35 - 15/35 = -1/35

If you meant to put addition, then your answer will be D) 29/35.

14/35 + 15/35 = 29/35

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3 years ago
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In the Keynesian-cross model, actual expenditures differ from planned expenditures by the amount of:
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Answer: Option (c) is correct.

Explanation:

Correct option: Unplanned inventory investment.

Unplanned inventory investment is a component of investment spending. The other component of investment spending is planned inventory investment.

Unplanned inventory investment occurs when actual sales are more or less than the company's expected sales which results in unplanned changes occurred in the inventories.

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3 years ago
Matt accepts a job offer as a chemical engineer in the R&D department of Tulip Inc., paint-manufacturing company. After acce
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Option A    

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Matt is contract bound and therefore he has no legal remedy. However, he should be happy for his promotion and incremental package as the company has no need to do so for him whatsoever.

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Eastern University had the following transactions at the beginning of its academic year: Student tuition and fees were billed in
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Explanation:

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5 0
3 years ago
On January​ 1, Helmut pays​ $2,000 for a​ 10% capital,​ profits, and loss interest in a​ partnership, which has recourse liabili
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Answer: $3,900

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Helmut paid $2,000 for the interest in the partnership making their starting basis $2,000.

Basis from the liability has to be added. Helmut paid for 10% so,

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= $2,000

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= 2,000 (starting basis) + 2,000 (from Liability) + 500(increase in liability) - 600 ( losses)

= $3,900

Helmut's basis at year end is $3,900.

3 0
3 years ago
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