C14Q3

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University of Texas, Permian Basin *

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3302

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Accounting

Date

Apr 3, 2024

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pdf

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3

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3/18/24, 11:53 AM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 1/3 Score: 16.12/100 Points 16.12 %
3/18/24, 11:53 AM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 2/3 3. Award: 0 out of 5.26 points Brief Exercise 14-7 (Algo) Straight-line interest on bonds [LO14-2] On January 1, a company issued 5%, 15-year bonds with a face amount of $80 million for $59,249,660 to yield 8%. Interest is paid semiannually. What was the straight-line interest expense on the December 31 annual income statement? Note: Round intermediate calculations and your final answer to the nearest whole dollar. Interest expense $ 1,802,074 References Worksheet Difficulty: 1 Easy Brief Exercise 14- 7 (Algo) Straight- line interest on bonds [LO14-2] Learning Objective: 14- 02 Account for bonds issued at face value, at a discount, or at a premium, recording interest using the effective interest method or using the straight-line method. Brief Exercise 14-7 (Algo) Straight-line interest on bonds [LO14-2] On January 1, a company issued 5%, 15-year bonds with a face amount of $80 million for $59,249,660 to yield 8%. Interest is paid semiannually. What was the straight-line interest expense on the December 31 annual income statement? Note: Round intermediate calculations and your final answer to the nearest whole dollar. +/-1 $ Interest expense 5,383,356 Explanation: Interest will be a plug figure: $80,000,000 − $59,249,660 = $20,750,340 discount
3/18/24, 11:53 AM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 3/3 $20,750,340 ÷ 30 semiannual periods = $691,678 reduction each period Date General Journal Debit Credit June 30 Interest expense (to balance) 2,691,678 Discount on bonds payable (difference) 691,678 Cash (2.5% × $80,000,000) 2,000,000 December 31 Interest expense (to balance) 2,691,678 Discount on bonds payable (difference) 691,678 Cash (2.5% × $80,000,000) 2,000,000 Interest expense for the year: $2,691,678 + $2,691,678 = $5,383,356
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