Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash interest Effective interest Decrease in balance Outstanding balance 1/1/2021 $ 207,020 6/30/2021 $ 7,000 $ 6,211 $ 789 206,230 12/31/2021 7,000 6,187 813 205,417 6/30/2022 7,000 6,163 837 204,580 12/31/2022 7,000 6,137 863 203,717 6/30/2023 7,000 6,112 888 202,829 12/31/2023 7,000 6,085 915 201,913 6/30/2024 7,000 6,057 943 200,971 12/31/2024 7,000 6,029 971 200,000 What is the annual effective interest rate on the bonds?
Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash interest Effective interest Decrease in balance Outstanding balance 1/1/2021 $ 207,020 6/30/2021 $ 7,000 $ 6,211 $ 789 206,230 12/31/2021 7,000 6,187 813 205,417 6/30/2022 7,000 6,163 837 204,580 12/31/2022 7,000 6,137 863 203,717 6/30/2023 7,000 6,112 888 202,829 12/31/2023 7,000 6,085 915 201,913 6/30/2024 7,000 6,057 943 200,971 12/31/2024 7,000 6,029 971 200,000 What is the annual effective interest rate on the bonds?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization schedule from issuance until maturity:
| Date | Cash interest |
Effective interest |
Decrease in balance |
Outstanding balance |
||||||||
| 1/1/2021 | $ | 207,020 | ||||||||||
| 6/30/2021 | $ | 7,000 | $ | 6,211 | $ | 789 | 206,230 | |||||
| 12/31/2021 | 7,000 | 6,187 | 813 | 205,417 | ||||||||
| 6/30/2022 | 7,000 | 6,163 | 837 | 204,580 | ||||||||
| 12/31/2022 | 7,000 | 6,137 | 863 | 203,717 | ||||||||
| 6/30/2023 | 7,000 | 6,112 | 888 | 202,829 | ||||||||
| 12/31/2023 | 7,000 | 6,085 | 915 | 201,913 | ||||||||
| 6/30/2024 | 7,000 | 6,057 | 943 | 200,971 | ||||||||
| 12/31/2024 | 7,000 | 6,029 | 971 | 200,000 | ||||||||
What is the annual effective interest rate on the bonds?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education