Consider the following information for a simultaneous move game: If you charge a low price (LP) and your rival charges a LP, you
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Answer:
At June 30th, 2020 an investor will purchase the bonds at 197,327 which is the present value of the bond at the market rate.
<u>June 30th entries:</u>
interest expense 11,627.4 debit
discount on bonds payable 627.4 credit
cash 11000 credit
/effective method
interest expense 11,776.25 debit
discount on bonds payable 776.25 credit
cash 11000 credit
/straight-line method
the tables are attached to the answer.
Explanation:
effective method
procceds 193,790
face value 200,000
discount on bonds payable 6,210
bond rate 0.055 (11% annual / 2 payment per year)
market rate 0.06 (12% annual / 2 payment per year)
straight line:
6,210 / 8 (4 years and 2 payment per year) = 776,25
