What is the difference between a co-payment and co-insurance?

Serotta Corporation is planning to issue bonds with a face value of $390,000 and a coupon rate of 16 percent. The bonds mature i

Nostrana [21]

Answer and Explanation:

Before recording the journal entries following calculations need to be made

Maturity amount $390,000

Interest periods 8

The Market rate of interest 3%

Now Quarterly interest paid $15,600 ($390,000 × 16% ×3 ÷ 12) Annuity factor for 8 periods 7.0197

And, Present value factor for 8th period 0.7894

So,

The Present value of Interest $109,507

Add: And, the Present value of Maturity $307,866

Issue price $417,373

Amortization table

Date Interest paid Interest Premium Unamortized Carrying

Expense Amortized Premium Value

01.01 Yr1 $27,373 $417,373

31.03 Yr 1 $15,600 $12,521 $3,079 $24,294 $414,294

30.06 Yr 1 $15,600 $12,429 $3,171 $21,123 $411,123

30.09 Yr1 $15,600 $12,334 $3,266 $17,857 $407,857

31.12 Yr 1 $15,600 $12,236 $3,364 $14,493 $404,493

Now the Journal entries

For Jan 1

Cash account Dr. $417,373

To Bonds payable $390,000

To Premium on bonds payable $27,373\

(Being the bond payable is recorded)

On Mar 31

Interest expense Dr. $12,521

Premium on bonds payable Dr. $3,079

To Cash $15,600

(Being cash paid is recorded)

On Jun 30

Interest expense Dr. $12,429

Premium on bonds payable Dr. $3,171

To Cash $15,600

(Being cash paid is recorded)

On Sep 30

Interest expense Dr. $12,334

Premium on bonds payable Dr. $3,266

To Cash $15,600

(being cash paid is recorded)

On Dec 31

Interest expense Dr. $12,236

Premium on bonds payable Dr. $3,364

To Cash $15,600

(being cash paid is recorded)

5 0

3 years ago

If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves

fiasKO [112]

Answer:

This is known as Bank panic

Explanation:

Bank panic happens when in a banking system, many banks suffer from a bank run, that is, many of its depositors loss their confidence that the bank may repay their deposit, thus they want to withdraw their deposit put with the bank.

As Banks operating using notably high leverage, many of its assets are not highly liquid ( e.g: loans, bonds that will not be paid until maturity) and the fact that they lend to and borrow from each others frequently and heavily, a bank run happens for one bank may cause liquidity issues to not only that bank but also other banks in the systems.

Having understood that, people tend to speculate that a run on one bank will cause significant problem to the systems, and a likely probability that bank panic occurs.

5 0

4 years ago

A list of concepts are provided below. Select the appropriate description for the concept.

STALIN [3.7K]

Answer:

1. Cash-basis accounting - Companies record revenues when they receive cash and record expenses when they pay out cash.

Unlike in Accrual basis accounting, here revenue is recognized when the money is paid regardless of if the payment for services comes after a year. The same goes for expenses. Tax authorities use the Cash basis.

2. Fiscal year - An Accounting time period that is one year in length.

This is the Accounting period for a firm. It runs for 12 months and depends on when they started business or when they want to report financials.

3. Revenue recognition principle - Recognize revenue in the accounting period in which a performance obligation is satisfied

This falls under the Accrual basis of accounting. It is recommended by GAAP. Revenue should be recognized only when the service has been accomplished regardless of when actual payment is made.

4. Expense recognition principle - Efforts (expenses) should be matched with accomplishments (revenues).

Follows the same premise as the Revenue recognition principle. Recognize expenses when incurred and should be matched to revenues.

8 0

4 years ago

What does Law Professor Dorothy Brown believe is one of the greatest benefits of the Earned Income Credit?

Dahasolnce [82]

She believes the greatest benefit is the number of children that are lifted out of poverty

6 0

3 years ago

Snow Valley Ski Resort has been contracting snow removal from its parking lots at a cost of $350/day. A snow-removal machine can

raketka [301]

Answer:

The number of days needs to be found is 39 days

Explanation:

The number of days per year the machine is used that brings the Snow Valley Ski Resort to break-even for the two alternative ways given in the question is the number of days that equalized the net present value of the two alternatives being discounted at MARR 12%.

Net Present value of alternative 1 : Buying the machine ; calculated as below

Cost of buying the machine + annual cost of operating and maintaining = -27,000 - (7,000/12%) x (1-1.12^-6) = $-55,779.85

Net Present value of alternative 2: Renting the machine; which is the present value of annual renting cost for 6 years period. Annual renting cost is denoted as $(350 x n) with n is the number of days in use. Thus, net present value is calculated as: (-350n/ 0.12) / ( 1 - 1.12^-6)

As explained above, the number of days to bring to break-even point is:

(350n/ 0.12) x ( 1 - 1.12^-6) = 55,779.85 <=> 350n = 13,567.1 <=> n = 39 days.

8 0

4 years ago