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saveliy_v [14]
3 years ago
10

ABC Company received $9,631 for its 5-year, 10% bonds with a total face value of $10,000. The market rate of interest was 11%. T

he bonds pay interest annually on December 31. How much interest expense will ABC Corporation record on the first annual interest payment date using the effective-interest method?A. $1,059
B. $1,000
C. $1,074
D. $963.10
Business
2 answers:
Basile [38]3 years ago
8 0

Answer:

A. $1,059

Explanation:

Interest payment and interest expense of the bond issued on discount is different. The difference of both of these values is the amortization of discount on the bond, which is added to carrying value of the bond each year to make the carrying value equals to face value at maturity date.

Interest expense using effective interest method is calculated by multiplying the market interest rate to the net carrying value of the bond.

Carrying value of the bond in 1 st year = $9,631

Market Rate = 11%

Interest expense = $9,631 x 11% = $1059.41

Anastaziya [24]3 years ago
5 0

Answer:

The correct answer is Option A.

Explanation:

The effective interest rate (EIR) method is used when a bond is purchased at a discount or premium.

In the case of the question, the bond was purchased at $9,631 with a face value of $10,000. Interest expense is calculated as the bond price multiplied by the market rate, i.e. $9,631  x 11% = $1,059.41.

Therefore, ABC Company would record $1,059 on the first annual interest payment date using the effective-interest method.

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Answer:

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Explanation:

   Highlight Construction Company  

   Summarized Income Statement

   For the year December 31, 2014

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Sales Revenue                                        117,000

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Income Tax Expense (30,800*30%)          (9,240)

Net Income                                                  <u>21,560</u>

As per requirement of the question, only summarized income statement is prepared.

                                                                                                                                                         

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Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions ma
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Decision-making problems that could occur when using absorption costing include inappropriate __<u>pricing</u>____ decisions, and decisions made to ___<u>drop</u>___ products that are, in fact, profitable.

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Absorption costing is the costing method that includes both direct and indirect costs in the costs of a product.

It is the opposite of variable or marginal costing, which takes into account only the direct costs in determining the product cost.

Thus, the decision-making problems with absorption costing include <u>pricing</u> decisions and decisions involving whether to <u>drop</u> profitable products.

Learn more about absorption costing at brainly.com/question/26276034

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2 years ago
Too Young, Inc., has a bond outstanding with a coupon rate of 7 percent and semiannual payments. The bond currently sells for $9
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Answer:

The company's pretax cost of debt is 7.45 %.

Explanation:

When it comes to bonds, the cost of debt is the required return on the bond known as the Yield to Maturity (YTM) of the bond.

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N = 23 × 2 = 46

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Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the n
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