Digital Telephony issued 10% bonds, dated January 1, with a face amount of $43 million on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Digital recorded the issue as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) General Journal Cash Discount on bonds Bonds payable Debit 38,067,728 4,932,272 Credit 43,000,000 Digital also leased switching equipment to Midsouth Communications, Inc. on September 30, 2021. Digital purchased the equipment from MDS Corp. at a cost of $6 million. The five-year lease agreement calls for Midsouth to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2021. Digital's implicit interest rate is 12%. Required: 1. What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? 2. What would be the amounts related to the lease that Midsouth would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? 3. What would be the amounts related to the lease that Digital would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? 4. Assume MDS manufactured the equipment at a cost of $5 million and that Midsouth leased the equipment directly from MDS. What would be the amounts related to the lease that MDS would report in its statement of cash flows for the year ended December 31, 2021? What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? (Do not round intermediate calculations. Enter your answers in whole dollars. List cash outflows as negative amounts.)
Digital Telephony issued 10% bonds, dated January 1, with a face amount of $43 million on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Digital recorded the issue as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) General Journal Cash Discount on bonds Bonds payable Debit 38,067,728 4,932,272 Credit 43,000,000 Digital also leased switching equipment to Midsouth Communications, Inc. on September 30, 2021. Digital purchased the equipment from MDS Corp. at a cost of $6 million. The five-year lease agreement calls for Midsouth to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2021. Digital's implicit interest rate is 12%. Required: 1. What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? 2. What would be the amounts related to the lease that Midsouth would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? 3. What would be the amounts related to the lease that Digital would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? 4. Assume MDS manufactured the equipment at a cost of $5 million and that Midsouth leased the equipment directly from MDS. What would be the amounts related to the lease that MDS would report in its statement of cash flows for the year ended December 31, 2021? What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year ended December 31, 2021, under the direct method? (Do not round intermediate calculations. Enter your answers in whole dollars. List cash outflows as negative amounts.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Digital Telephony issued 10% bonds, dated January 1, with a face amount of $43 million on January 1, 2021. The bonds
mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on
June 30 and December 31. Digital recorded the issue as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and
PVAD of $1) (Use appropriate factor(s) from the tables provided.)
General Journal
Cash
Discount on bonds
Bonds payable
Debit
38,067,728
4,932,272
Credit
43,000,000
Digital also leased switching equipment to Midsouth Communications, Inc. on September 30, 2021. Digital purchased the
equipment from MDS Corp. at a cost of $6 million. The five-year lease agreement calls for Midsouth to make quarterly
lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on
September 30, 2021. Digital's implicit interest rate is 12%.
Required:
1. What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year
ended December 31, 2021, under the direct method?
2. What would be the amounts related to the lease that Midsouth would report in its statement of cash flows for the year
ended December 31, 2021, under the direct method?
3. What would be the amounts related to the lease that Digital would report in its statement of cash flows for the year
ended December 31, 2021, under the direct method?
4. Assume MDS manufactured the equipment at a cost of $5 million and that Midsouth leased the equipment directly
from MDS. What would be the amounts related to the lease that MDS would report in its statement of cash flows for the
year ended December 31, 2021?
What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year
ended December 31, 2021, under the direct method? (Do not round intermediate calculations. Enter your answers in
whole dollars. List cash outflows as negative amounts.)
Activity
Operating activities Cash outflow
Investing activities
Financing activities Cash inflow
Cash Flow
Amount
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