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
ankoles [38]
3 years ago
12

$600,000 of 7% bonds due in 10 years. The bonds pay interest each July 1 and January 1. Assume an effective interest rate of 8%.

Determine the price of the bond and prepare an amortization schedule for two years. What is the interest expense for January 1, 2021
Business
1 answer:
fenix001 [56]3 years ago
8 0

Answer:

the market price of the bonds = present value of face value + present value of coupons:

PV of face value = $600,000 / (1 + 4%)²⁰ = $273,832.17

PV of coupons = $21,000 x 13.590 (annuity factor 4%, n = 20) = $285,390

market price of the bonds = $559,222.17 ≈ I will round down to $559,222

The journal entry to record the issuance of the bonds:

January 1, 2020, bonds are issued

Dr Cash 559,222

Dr Discount on bonds payable 40,778

    Cr Bonds payable

Assuming the effective interest method:

July 1, 2020, first coupon payment

Dr Interest expense 22,369

    Cr Cash 21,000

    Cr Discount on bonds payable 1,369

amortization of discount = ($559,222 x 4%) - $21,000 = $22,369 - $21,000 = $1,369

January 1, 2021, second coupon payment

Dr Interest expense 22,424

    Cr Cash 21,000

    Cr Discount on bonds payable 1,424

amortization of discount = ($560,591 x 4%) - $21,000 = $22,424- $21,000 = $1,424

July 1, 2021, third coupon payment

Dr Interest expense 22,481

    Cr Cash 21,000

    Cr Discount on bonds payable 1,481

amortization of discount = ($562,015 x 4%) - $21,000 = $22,481- $21,000 = $1,481

January 1, 2022, fourth coupon payment

Dr Interest expense 22,540

    Cr Cash 21,000

    Cr Discount on bonds payable 1,540

amortization of discount = ($563,496 x 4%) - $21,000 = $22,540- $21,000 = $1,523

Amortization schedule:

Period      Interest        Bond discount      Interest            Book

                payment      amortization          expense          value

0                                                                                          $559,222

1               $21,000       $1,369                    $22,369          $560,591

2              $21,000       $1,424                    $22,424          $562,015

3              $21,000       $1,481                     $22,481           $563,496

4              $21,000       $1,540                    $22,540          $565,036

You might be interested in
Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________
GenaCL600 [577]
Even when competitive firms are unable to calculate marginal revenue product directly, the pressures of competition in the labor market will push wage rates toward the marginal revenue product of labor. 
By comparing the marginal revenue<span> and </span>marginal<span> cost from each unit produced, a </span>firm<span> in a </span>competitive<span> market can </span>determine<span> the </span>profit<span>-maximizing level of production.</span>
5 0
3 years ago
Read 2 more answers
Which is the shortest and simplest tax form?
AfilCa [17]

Filling out a tax form is about as much fun as owing taxes to Uncle Sam. The complexity of the task intensifies as your tax life becomes more complicated.

That's why you should use the simplest tax return form you can, especially if you're still filling out your forms by hand.

But choose carefully. There are three personal income tax forms -- 1040, 1040A and 1040EZ -- with each designed to get the appropriate amount of your money to the IRS. Differences in the forms, however, could cost you if you're not paying attention.

The EZ is the shortest and simplest form, Form 1040A is a bit more complex and the long Form 1040 is the most detailed and potentially difficult. But even if your tax life is simple and straightforward, it might be worthwhile to investigate the other two forms. Why? Generally, the longer the form, the more opportunities for tax breaks.

6 0
3 years ago
Which is not among the current strategies used to prevent lead poisoning?
Artist 52 [7]
The answer to this question is labels<span> on lead-based paint
Labels on lead-based paint does not contribute tpreventingnt lead poisoning as much as advocating to not using such product
Rather than using lead-based paint, people could opt to use safer products such as titanium-white based paint, which is proven to be less toxic.

</span>
4 0
3 years ago
PLEASE ANSWER ASAP!!! (proof isnt needed!)<br> also rocky u better not be a troll!
AnnZ [28]
Answer:
INCREASE
Hope I help!!!
4 0
3 years ago
A great way to make an impression after an interview is to send a handwritten thank-you note to your interviewer within ________
Komok [63]

The best way to make an impression on your interviewer is to send a handwritten thank-you note within 48 hours after your interview.

<h3>What is an Interview?</h3>

An interview is an assessment of an individual. It is a structured conversation where one asks questions and the other provides an answer to the questions.

Interviews are used most times to know the qualification of an individual and to get to know more about the individual. To make an impression on the interviewer, it is advisable to send a thank you note to the interviewer within 48 hours after the interview.

Learn more about Interviews here:

brainly.com/question/8846894

5 0
2 years ago
Other questions:
  • Lindsay is training two new sales representatives, Lance and Ayden, to use the revised client-tracking database, which has been
    7·1 answer
  • When a firm initiates a price​ decrease, it must seriously consider how competitors will react. although not all competitors are
    5·1 answer
  • Last year, Blanda Brothers had positive net cash flow, yet cash on the balance sheet decreased. Which of the following could exp
    5·1 answer
  • Profit plays an important role in business give any four reason to justify the statement
    10·1 answer
  • On april 1, the company retained an attorney for a flat monthly fee of $3,500. Payment for april legal services was made by the
    7·1 answer
  • Determine the present value of the following single amounts (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1)
    5·1 answer
  • According to the Capital Asset Pricing Model (CAPM), correctly priced securities:
    7·1 answer
  • If you find yourself part of a team at work , what is the best way to behave during a team meeting ?
    6·2 answers
  • You place $230.00 into an investment that has an annually compounding rate of 2.5%. How much money is in the investment after 3
    14·1 answer
  • On June 1, 2021, Emmet Property Management entered into a 2-year contract to oversee leasing and maintenance for an apartment bu
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!