McNeil Corporation issued $750,000 of 6%, 10-year bonds payable on January 1, 2019. The market interest rate at the date of issuance was 4%, and the bonds pay interest semiannually (on June 30 and December 31). McNeil Corporation's year-end is June 30. McNeil prepared an effective-interest amortization table for the bonds through the first three interest payments asfollows:
McNeil Corporation issued $750,000 of 6%, 10-year bonds payable on January 1, 2019. The market interest rate at the date of issuance was 4%, and the bonds pay interest semiannually (on June 30 and December 31). McNeil Corporation's year-end is June 30. McNeil prepared an effective-interest amortization table for the bonds through the first three interest payments asfollows:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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McNeil Corporation issued $750,000 of 6%, 10-year bonds payable on January 1, 2019. The market interest rate at the date of issuance was 4%, and the bonds pay interest semiannually (on June 30 and December 31). McNeil Corporation's year-end is June 30. McNeil prepared an effective-interest amortization table for the bonds through the first three interest payments asfollows:
Transcribed Image Text:Use the amortization table for McNeil Corporation's bonds to answer the following questions:
1. How much cash did McNeil Corporation borrow on January 1, 2019? How much cash will
McNeil Corporation pay back at maturity?
2. How much cash interest will McNeil Corporation pay each six months?
3. How much interest expense will McNeil Corporation report on Jline 30, 2019, and on
December 31,2019? Does the amount of interest expense increase or decrease each
period? Why?
Transcribed Image Text:Semiannual
Interest Date
Interest
Payment
Premium
Account
Balance
Interest
Premium
Amortization
Bond Carrying
Expense
Amount
Jan 1, 2019
122,636
872,636
Jun 30, 2019
22,500
17.453
5,047
117,589
867 589
Dec 31, 2019
22,500
17,352
5,148
112,441
862,441
Jun 30, 2020
22,500
17.249
5.251
107.190
857.190
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