On January 1, 2020, a company issued $250000, 8%, 11-year bonds payable at 98. The market rate on issue date was 12 %, and interest is payable semi- annually. What is interest expense for 2020 if the straight line method is used to amortize bond premiums and discounts?

On January 1, 2020, a company issued $250000, 8%, 11-year bonds payable at 98. The market rate on issue date was 12 %, and interest is payable semi- annually. What is interest expense for 2020 if the straight line method is used to amortize bond premiums and discounts?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

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On January 1, 2020, a company issued $250000, 8%, 11-year bonds payable at 98. The market
rate on issue date was 12%, and interest is payable semi-annually. What is interest expense for
2020 if the straight line method is used to amortize bond premiums and discounts?

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