Lopez Plastics Company (LPC) issued callable bonds on January 1, 2024. LPC's accountanthas projected the following amortization schedule from issuance until maturity:Date Cash interest Effective interest Decrease in balance Outstanding balance1/1/2024 $207,0206/30/2024 $7,000 $6,211 $789206,23012/31/2024 7,0006,187813205,4176/30/2025 7,0006,163837204,58012/31/2025 7,0006,137863203,7176/30/2026 7,0006,112888202,82912/31/2026 7,0006,085915201,9136/30/2027 7,0006,057943200,97112/31/2027 7,0006,029971200,000What is the annual effective interest rate on the bonds?

Effective annual interest rate is the rate of interest that an investor can earn (or pay) in a year…

Answered: Lopez Plastics Company (LPC) issued…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 9RE

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Short-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.
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 01-01-21 207,020 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 LPC calls the bonds at 103 immediately after the interest payment on 12/31/2022 and retires them. What gain or loss, if any, would LPC record on this date? Multiple Choice No gain or loss $3,717 gain $2,283 loss $6,000 loss

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