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Mashcka [7]
2 years ago
12

Straight-Line: Amortization of bond discount LO P2 Skip to question [The following information applies to the questions displaye

d below.] Legacy issues $640,000 of 8.5%, four-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. They are issued at $570,443 when the market rate is 12%. Problem 14-4A
Required:
1. Prepare the January 1 journal entry to record the bonds' issuance
2. determine the total bond interest expense to be recognized over the bonds' life.
Business
1 answer:
natima [27]2 years ago
6 0

Answer:

Legacy

1. Journal Entry:

January 1:

Debit Cash $570,443

Debit Bonds Discount $69,557

Credit Bonds Payable $640,000

To record the issuance of the bonds at a discount.

2. Total bond interest expense to be recognized over the bonds' life:

= $287,160

Explanation:

a) Data and Calculations:

January 1, 2019

Face value of bonds issued = $640,000

Price of bonds =                       $570,443

Bonds discount =                      $69,557 ($640,000 - $570,443)

Coupon interest rate = 8.5%

Market interest rate = 12%

Maturity period = 4 years

Interest payment = semiannual on June 30 and December 31

With straight-line amortization of bonds discount, the semiannual amortization will be = $8,695

Semi-annual interest payment = $27,200 ($640,000 * 4.25%)

Semi-annual interest expense = $35,895 ($27,200 + $8,695)

Annual interest expense = $71,790

1. Transaction Analysis

January 1:

Cash $570,443 Bonds Discount $69,557 Bonds Payable $640,000

2. Total bond interest expense to be recognized over the bonds' life:

= $287,160 ($71,790 * 4) or ($35,895 * 8)

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Maurice can drive or fly from Jacksonville, Florida to Atlanda, Georgia, for a one-day business trip. If he drives, he will be a
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8 0
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Required information
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1. Ending inventory = $3519

2. Cost of Goods Sold = $21030

3. Sales Revenue = $27279

4. Gross Profit = $6249

Explanation:

FIFO method of inventory valuation is whereby the stock that first comes into the business, leaves first. This is common in perishable inventory such as vegetables or fruits.

Jan 1. Beginning inventory: 53 units x $45 = $2385

Total

53 units x $45 = $2385

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53 units x $45 = $2385

133 units x $47 = $6251

Jul 16. Purchase 203 units x $50 = $10150

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53 units x $45 = $2385

133 units x $47 = $6251

203 units x $50 = $10150

Oct 6. Purchase 113 units x $51 = $5763

53 units x $45 = $2385

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113 units x $51 = $5763

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69 units x $51 = $3519

2. Cost of Goods Sold =

[$2385 + $6251 + $10150 + (44 units x $51)] = $21030

OR $24549 - 3519 = $21030

3. Sales Revenue =

433 units x $63 = $27279

4. Gross Profit = Sales Revenue - Cost of Goods Sold hence,

$27279 - 21030 = $6249

4 0
3 years ago
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