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timama [110]
2 years ago
14

On March 1, 2021, McHugh Enterprises issued 1000 of its 8%, $1,000 bonds dated January 1, 2021 at 98. Interest is payable semian

nually on January 1 and July 1. The bonds mature on January 1, 2031. McHugh paid $50,000 in bond issue costs. McHugh uses straight-line amortization. The interest expense recognized on July 1, 2021 will be:__________
Business
1 answer:
natka813 [3]2 years ago
6 0

Answer: $82000

Explanation:

Interest will be calculated as:

= No of shares x Face value per Share x Interest rate

= 1000 × $1000 × 8%

= 1000 × $1000 × 0.08

= $80000

Total face value of shares issued = 1000 × $1000 = $1,000,000

Issue Amount will be:

= No of shares x Face value per Share x Issue rate

= 1,000 x 1,000 x 98 %

= $980,000

Discount on issue will be:

= $1,000,000 - $980,000

= $20,000

Amortization of Discount on issue per annum will be:

= $20,000/10

= $2000

Therefore, interest expense will be:

= $80000 + $2000

= $82000

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3 0
2 years ago
Steel Company as lessee signed a lease agreement for equipment for 5 years, beginning December 31, 2017. Annual rental payments
balu736 [363]

Answer:

a.

                                                                       Debit   Credit

December 31, 2017

Lease Equipment Under Capital Leases    $166,794  

                                                      Lease Liability    $166,794

December 31, 2017/January 1, 2018

Lease Liability                                        $40,000  

                                                         Cash             $40,000

b.                                           Debit               Credit

December 31, 2018

Depreciation Expense  $23,828  

          Accumulated Depreciation      $23,828

December 31, 2018/January 1, 2019

Interest Expense           $12,679  

Lease Liability          $27,321  

                           Cash                     $40,000

c.                                             Debit     Credit

December 31, 2019

Depreciation Expense        $23,828  

  Accumulated Depreciation  $23,828

December 31, 2019/January 1, 2020

Interest Expense                    $9,947  

Lease Liability                 $30,053  

                Cash                         $40,000

d. Balance Sheet

December 31,2019

Property Plant and Equipment                             Current Liabilities  

Leased Equipment Under Capital Leases $166,794 Lease Liability $33,058

Less Accumulated Depreciation $47,656  

                                                        $119,138                Long Term  

                                                                                      Lease Liability $36,362

Explanation:

a. The journal entries, that should be recorded on January 1, and December 31, 2017, by Steel would be as follows:

                                                                       Debit   Credit

December 31, 2017

Lease Equipment Under Capital Leases    $166,794  

                                                      Lease Liability    $166,794

December 31, 2017/January 1, 2018

Lease Liability                                        $40,000  

                                                         Cash             $40,000

Lease Equipment Under Capital Leases=(40,000*PVIFA(10%,Years = 40,000*4.16986))= $166,794  

b. The journal entries, that should be recorded on January 1 and December 31, 2018, by Steel would be as follows:

                                          Debit               Credit

December 31, 2018

Depreciation Expense  $23,828  

          Accumulated Depreciation      $23,828

December 31, 2018/January 1, 2019

Interest Expense           $12,679  

Lease Liability          $27,321  

                           Cash                     $40,000

Depreciation Expense= (166,794/7)=$23,828

Interest Expense [(166,794 - 40,000)*10%]=$12,679  

Lease Liability=(40,000 - 12,679)=$27,321

c. The journal entries, that should be recorded on January 1, and December 31, 2019, by Steel would be as follows:

                                            Debit     Credit

December 31, 2019

Depreciation Expense        $23,828  

  Accumulated Depreciation  $23,828

December 31, 2019/January 1, 2020

Interest Expense                    $9,947  

Lease Liability                 $30,053  

                Cash                         $40,000

d. The amounts that would appear on Steel's December 31, 2019, balance sheet relative to the lease arrangement would be as follows:

Balance Sheet

December 31,2019

Property Plant and Equipment                             Current Liabilities  

Leased Equipment Under Capital Leases $166,794 Lease Liability $33,058

Less Accumulated Depreciation $47,656  

                                                        $119,138                Long Term  

                                                                                      Lease Liability $36,362

8 0
3 years ago
US Apparel (USA) manufactures plain white and solid-colored T-shirts. Budgeted inputs include the following
Artemon [7]

Answer:

A) USA will not be better off switching to the new dye since the cost is greater than the Fine

B)  $118076

C)  The reduction in material/fabric cost can be achieved by the reduction in material wastage and in the use of quality materials

while the reduction in labor cost can be achieved by Hiring well trained employees with the necessary skillset

Explanation:

<u>A) Determine If the USA be better off using the new dye </u>

Units of clothes to be dyed = 50,000

Difference in cost = [ 4 ( 1.25 - 0.5 ) ] = 4 * 0.75 = $3

Total cost of using the new dye = 50000 * $3 = $150,000

Fine = $130,000

hence USA will not be better off switching to the new dye since the cost is greater than the Fine

<u>B) Determine by how much overall cost will be reduced at the end of 12 months using Kaizen costing </u>

<em>condition : reduce fabric and labor cost by 1%</em>

Original Monthly Costs without the use of Kaizen Costing =( Total Units/Number of Months)*(Fabric Cost per Unit + Labor Cost per Unit)*Number of Months

= [( 10000 + 50000 )/12 ) * ( 6 + 4 ) ] *12

= [ 5000 * 10 ] *12  = $600,000

Applying kaizen costing

Given: Fabric cost per unit = $6 , Labor cost per unit = $4

          Total units of production = 10000 + 50000 = 60,000

Kaizen costing formula per month = [ (cost per unit * total units / 12 ) - ( 1% of cost per unit * total units / 12) ]

Total annual cost using Kaizen costing = $56807.61

difference in cost = $600,000 - $568076 = $31924

with the new dye and Kaizen costing the overall cost will be change by $118076  i.e. ($150,000 - $31924) = <em>$118076 </em>

C ) The reduction in material/fabric cost can be achieved by the reduction in material wastage and in the use of quality materials

while the reduction in labor cost can be achieved by Hiring well trained employees with the necessary skillset

5 0
3 years ago
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