Lopez Plastics Company (LPC) issued callable bonds on January 1, 2024. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash interest Effective interest Decrease in balance Outstanding balance 1/1/2024 $207,020 6/30/2024 $7,000 $6,211 $789 206,230 12/31/2024 7,000 6,187 813 205,417 6/30/2025 7,000 6,163 837 204,580 12/31/2025 7,000 6,137 863 203,717 6/30/2026 7,000 6,112 888 202,829 12/31/2026 7,000 6,085 915 201,913 6/30/2027 7,000 6,057 943 200,971 12/31/2027 7,000 6,029 971 200,000 What is the annual effective interest rate on the bonds?
Lopez Plastics Company (LPC) issued callable bonds on January 1, 2024. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash interest Effective interest Decrease in balance Outstanding balance 1/1/2024 $207,020 6/30/2024 $7,000 $6,211 $789 206,230 12/31/2024 7,000 6,187 813 205,417 6/30/2025 7,000 6,163 837 204,580 12/31/2025 7,000 6,137 863 203,717 6/30/2026 7,000 6,112 888 202,829 12/31/2026 7,000 6,085 915 201,913 6/30/2027 7,000 6,057 943 200,971 12/31/2027 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
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Transcribed Image Text:Lopez Plastics Company (LPC) issued callable bonds on January 1, 2024. LPC's accountant
has projected the following amortization schedule from issuance until maturity:
Date Cash interest Effective interest Decrease in balance Outstanding balance
1/1/2024 $207,020
6/30/2024 $7,000 $6,211 $789
206,230
12/31/2024 7,000
6,187
813
205,417
6/30/2025 7,000
6,163
837
204,580
12/31/2025 7,000
6,137
863
203,717
6/30/2026 7,000
6,112
888
202,829
12/31/2026 7,000
6,085
915
201,913
6/30/2027 7,000
6,057
943
200,971
12/31/2027 7,000
6,029
971
200,000
What is the annual effective interest rate on the bonds?
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