Purchases that have substantial social or economic consequences: question 13 options: represent routine purchases that pose litt
1 answer:
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Answer:
a)
Total $483,841.9681
b)
cash 483,842 debit
discount on BP 16,158 debit
Bonds Payable 500,000 credit
c)
attached the schedule
d)
interest expense 24,192.1 debit
discount on BP 1,692.1 credit
cash 22,500 credit
e)
interest expense 24276.7 debit
discount on BP 1776.7 credit
cash 22500 credit
Explanation:
The price of the bonds is the present valeu of the maturity and coupon payment at the market rate:
Coupon payment:
22,500.000 (500,000 x 9% /2 )
time 8 (4 years x 2 payment per year)
rate 0.05 (10% / 2)
PV $145,422.2871
Maturity 500,000.00
time 8.00
rate 0.05
PV 338,419.68
PV c $145,422.2871
PV m $338,419.6810
Total $483,841.9681
We compare against face valeu to deteminate wether is premium or discount.
procceds 483,842
face value 500,000
discount on bonds payable -16,158
<u><em>As lower it is a discount.</em></u>
<u><em /></u>
For the interst we calcualte doing market rate times carrying value at the time given.
then we subtract the cash outlay and the difference is the amortization in the discounts
