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mixer [17]
3 years ago
5

On January 1, 2021, Rapid Airlines issued $200 million of its 8% bonds for $184 million. The bonds were priced to yield 10%. Int

erest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $188 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates.Required:1. Prepare the journal entry to record interest on June 30, 2021 (the first interest payment).2. Prepare the journal entry to record interest on December 31, 2021 (the second interest payment).3. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2021,
Business
1 answer:
miv72 [106K]3 years ago
3 0

Answer:

1.Dr Interest expense $8million

Cr Cash $8 million

2.Dr Interest expense $8 million

Cr Cash 8 million

3. Dr Bonds Payable $12million

Cr Adjustment in fair value $12 million

Explanation:

Preparation of Journal entries

1) June 30, 2021 Preparation of Journal entry for interest payment

Dr Interest expense $8million

Cr Cash $8 million

[($200 million * 8%) *6/12]

The reason why it was multipled with 6/12 was because the payments are half yearly.

2) Dec 31, 2021 Preparation of Journal entry for interest payment

Dr Interest expense $8 million

Cr Cash 8 million

[($200 million * 8%) *6/12]

3) Dec 31, 2021 Preparation of Fair value adjustment

Dr Bonds Payable $12million

Cr Adjustment in fair value $12 million

($200 million - $188 million)

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Which method are managers using when they use their judgment to classify costs as​ variable
oksian1 [2.3K]

Answer:

Account Analysis

Explanation:

The estimation of different costs associated with the product is know account analysis. In this method the cost is measured into three categories as below

  1. Variable cost
  2. Fixed Cost
  3. Mixed Cost

All these costs are calculated using linear algebra as below

Y= B + MX

where

Y is the total costs of product

B = Fixed Cost of the product

M = Variable cost of the product

X = Number of Units

5 0
3 years ago
Assume that​ "cost of​ processing" includes all labor and​ materials, including the​ owner's wages. Assume further that​ Isabel'
Vika [28.1K]

Answer:

Check the explanation

Explanation:

In the field of economics, to draw a graph that will show a cost curve of any item will involve the costs of production as a function of the overall quantity that was produced. When there’s a free market economy, productively effective and efficient firms optimize their production procedures by reducing their cost consistent with each potential level of production, thereby resulting into a cost curve.

Kindly check the attached images below to see the full explanation and the graphical presentation of the total cost curve.

7 0
3 years ago
A company set-up a petty cash fund with $800. The disbursements are as follows:
Radda [10]

Answer:

Petty Cash

Explanation:

The fundamental principle of accounting is credit the giver and debit the receiver. In this instance petty cash is giving out money to Office Supplies, Shipping, Postage and Delivery expense

7 0
3 years ago
Which of the following is a characteristic of both the sales approach for service-type warranties and the expense approach for a
user100 [1]

Answer: Unearned warranty revenue

Explanation:

Unearned warranty revenue is usually shown as an unearned revenues in the accrued liabilities during the preparation of the balance sheets.

It should be noted that the unearned warranty revenue is a characteristic of both the sales approach for service-type warranties and the expense approach for assurance-type warranties.

3 0
3 years ago
Your broker is selling you an investment scheme in which you will receive $5,000 four years from now, $6,000 five years from now
kvasek [131]

Answer:

IRR = 3.64%

Explanation:

using a financial calculator or excel spreadsheet we can determine the IRR of this investment:

year 0 = -$15,000

year 1 = $0

year 2 = $0

year 3 = $0

year 4 = $5,000

year 5 = $6,000

year 6 = $7,000

IRR = 3.64%

Since your required rate of return is 12%, you should pay a maximum of  $10,128.57

6 0
2 years ago
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