Please help. Will give high points. But I also need thesolution 6. A company iss

Question

Please help. Will give high points. But I also need thesolution 6. A company issues $5,000,000, 7.8%,20-year bonds to yield 8% on January 1, 2007. Interest ispaid on June 30 and December 31. The proceeds from the bonds are$4,901,036. Using effective-interest amortization, how muchinterest expense will be recognized in 2007? (Points: 1)
       $195,000
       $390,000
       $392,124
       $392,083

Please help. Will give high points. But I also need thesolution 6. A company issues $5,000,000, 7.8%,20-year bonds to yield 8% on January 1, 2007. Interest ispaid on June 30 and December 31. The proceeds from the bonds are$4,901,036. Using effective-interest amortization, how muchinterest expense will be recognized in 2007? (Points: 1)
       $195,000
       $390,000
       $392,124
       $392,083

Explanation / Answer

$390,000

30-Jun

31-Dec

Effective Interestmethod Principal $5,000,000 lnterest ($9750 times 40semiannualperiods)

$390,000

(7.8% of 5000000)      Total Cashpayments to investors $5,390,000 less: cash receipts from investors -4901036     TotalInterest expense $488,964

30-Jun

Interest expense(488964 / 40) 12224        Discount onbonds payable(98964 / 40) 2474         Cash(5000000 X 7.8%/40) 9750

31-Dec

SAME ENTRY Total Interest expense on $5000000 is$390000 and amotized discount also of $98964 in 40 semiannual periods

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---