Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,200 million on July 1, 2021, at a price of $1,180 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semi-annually on June 30 and December 31.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...

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Item 17

Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,200 million on July 1, 2021, at a price of $1,180 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semi-annually on June 30 and December 31.

Required:
Prepare the journal entry to record interest at the effective interest rate at December 31. What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2021, if it uses the direct method?

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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