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
Dima020 [189]
2 years ago
8

Master Corp. issued 8%, $80,000 bonds on February 1, 2020. The bonds pay interest semiannually each July 31 and January 31 and w

ere issued to yield 7%. The bonds mature January 31, 2030, and the company uses the effective interest method to amortize bond discounts or premiums.
Required:
a. Prepare journal entries on the following dates.
1. February 1, 2020—Issuance of bonds.
2. July 31, 2020—Interest payment.
3. December 31, 2020—Interest accrual.
4. January 31, 2021—Interest payment. b. Indicate how the balance sheet and income statement of Master
b. Corp. for the year ended December 31, 2020, would reflect these transactions.
c. What is the total cost of financing assuming that the bonds remain outstanding for the full term?
d. What is the total cost of financing assuming that the bonds remain outstanding for the full term if the straight-line interest method was used to amortize the premium?
e. If the company were to have instead amortized the premium using the straight-line interest method, would interest expense recognized be lower or higher in 2020?
f. If the company were to have instead amortized the premium using the straight-line interest method, would interest expense recognized be lower or higher in 2030?
Business
1 answer:
Archy [21]2 years ago
5 0

Answer:

Master Corp.

a. Journal Entries:

1. Feb. 1, 2020:

Debit Cash $85,685

Credit 8% Bonds Payable $80,000

Credit Bonds Premium $5,685

To record the issuance of bonds at premium.

2. July 31, 2020:

Debit Interest Expense $2,999

Debit Bonds Premium $201

Credit Cash $3,200

To record the first payment of interest on the bonds and amortization of premium.

December 31, 2020:

Debit Interest Expense $2,493

Debit Bonds Premium $174

Credit Interest Payable $2,667

To accrue interest expense and bonds payable.

4. January 31, 2021:

Debit Interest Expense $499

Debit Bonds Premium $34

Debit Interest Payable $2,667

Credit Cash $3,200

To record the payment of interest.

b. Balance Sheet as of December 31, 2020:

Liabilities:

Bonds Payable $80,000

Bonds Premium $5,310 ($5,685 - 201 - 174)

Income Statement for the year ended December 31, 2020:

Interest Expense $5,492

c. The total cost of financing the bonds for full term is $58,315.04.

d. The total cost of financing is $58,315.04

e. Interest expense would have remained the same.

f. The interest expense would have remained the same as it is not dependent on the premium amortization method used.

Explanation:

a) Data and Calculations:

February 1, 2020:

Face value of issued bonds = $80,000

Price of issued bonds =          $85,685

Premium on bonds =                $5,685

N (# of periods)  20

I/Y (Interest per year)  8

PMT (Periodic Payment) = $ 3,200  

Results:

PV = $85,684.96

Sum of all periodic payments = $64,000.00

Total Interest $58,315.04

July 31, 2020:

Cash payment =   $3,200 ($80,000 * 4%)

Interest Expense    2,999 ($85,685 * 3.5%)

Premium amortized $201

December 31, 2020:

Interest Payable =   $2,667 ($80,000 * 4% * 5/6)

Interest expense = $2,493

Premium amortized   $174

January 31, 2021:

Interest Expense $499

Bonds Premium $34

Interest Payable $2,667

You might be interested in
Given the data below, if the cost of a factory adjustment is $7.50, when is it more
enyata [817]
Wheres the data given below/

8 0
3 years ago
Use the following information to determine this company's cash flows from financing activities.
mezya [45]
The answer is the last one (e)
4 0
3 years ago
_____ _____ includes employee behaviors that are directly involved in the transformation
Bingel [31]

Answer:

Task performance

routine

adaptive

creative task

Explanation:

Task performance

This is a performance assessment system that measures the way and manner a specific task was carried out. This can cover observable work-related behavioral pattern or time and accuracy of task

Routine Task performance

This is a performance assessment technique that involves popular attitude to normal demands or routine.

Adaptive Task performance

This deals with employees behavior towards certain, predictable and unusual job.

Creative Task Performance

This is the development of a useful ideas that can be deployed in both routine and adaptive task.

4 0
3 years ago
The multiplier is useful in determining the full-employment unemployment rate level of business inventories change in the rate o
sasho [114]

Answer:

The multiplier is useful in determining the change in GDP resulting from a change in spending

Explanation:

A change in autonomous spending will lead to a much larger final change in real GDP because of the multiplier effect. That spending will have a much larger final impact on real GDP.

7 0
3 years ago
ROMI is an acronym that stands for​ _____, and indicates how much value an​ organization's marketing activities create. A. retur
docker41 [41]

Answer:

A. return on marketing investment (ROMI)

Explanation: ROMI is used to measure the overall effectiveness of marketing campaign.

5 0
2 years ago
Other questions:
  • Newland and Palermo form a partnership. Newland contributes land with a book value of $50,000 and a fair value of $60,000. Newla
    7·1 answer
  • What are three marketing channels
    14·1 answer
  • The local supermarket buys lettuce each day to ensure really fresh produce. Each morning any lettuce that is left from the previ
    8·1 answer
  • a business intially sells their product to customers for $50. They find that many people are buying their product so they raise
    13·1 answer
  • If A sells to B, and B obtains title while goods are in transit, the goods were shipped ________. If C sells to D, and C maintai
    14·1 answer
  • Consider each of the transactions below. All of the expenditures were made in cash.
    7·1 answer
  • Waterway Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere a
    14·1 answer
  • What does Mrs. Morningstar say that Sancho and Bolsa couldn't find in a porta-potty?
    14·2 answers
  • Why is organizational support for a health and safety training initiative so important for the success of the training program?
    6·1 answer
  • A label on foods prepared and packaged onsite for retail sales must list which information?
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!