Bond Tras rand Company issued S1 J20,000 face value, eight-year, 11% bonds on ap

Question

Bond Tras rand Company issued S1 J20,000 face value, eight-year, 11% bonds on april 1, 2014, when the market rste of interest w5s 11%. Inte est payments ere due every October Requined: 1. Identify and Bnalyze the effect ofthe issuance of the bonds on April 1, 2014. and April 1. rend uses 8 cele dar year-end. ctivity Financing Cash Increase, Bonds Payable Increase Balance Sheet onty Show AlI Feed back How does this entry affect the sccounting equstion? tf fin ncial statement item is not affected, select-No Entry-and leave the annount box blank. the effect on a financial statement item is negative, i.e. decrease, be sure to enter thé answer with mnus sign. Income Statement Uonds Payable No Entry No Entry 2. Identity and analyae the efect of the payment of interest on Dctober 1, 2014 Activity ccounts Statements) Operating Cash Decreasc, Interest Expense Increase Bal8nce Sheetere Income Statement How does this ertry affect the aEcoanting squation f financisl statement item is not afected, select "No Entry and leave the amount box blank I the effect on a finsnciel statement item is negative, i.e, a decrease, be sure to enter the snower with minus sign Expenses - Net Income No Entry . Detemine the totsl cash inflows and outflows that occurred on the bonds ower the eipht-year life Total cash inflows Total cash outfiow

Explanation / Answer

Assets = liabilities Cash 1,320,000 Bonds payable 1,320,000 payment of interest on Oct 1,2014 1,320,000*11%*6/12 72600 Assets Stockholders Equity Expenses =Net income Cash -72,600 -72,600 interest exp -72,600 -72,600 3) Total cash inflows 1,320,000 totl cash outflows 1161600 (1,320,000*11%*8yrs)

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