On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 13M
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![On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the
effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Provide the answers to the following questions.
(1) What amount of interest expense is reported for 2021? (Round answer to 0 decimal places, e.g, 38,548.)
Interest expense reported for 2021 $
(2) Will the bond interest expense reported in 2021 be the same as, greater than, or less than the amount that would be
reported if the straight-line method of amortization were used?
The bond interest expense reported in 2021 will be greater thane the amount that would be reported if the straight-line me
(3) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.)
Total cost of borrowing over the life of the bondS
(4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest
expense if the straight-line method of amortization were used?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d39f439-c0df-4260-bff7-863bf3eaa9a0%2Fcd05efa5-dd19-44d0-9ae7-409133bc38ca%2F66uzcj_processed.png&w=3840&q=75)
Transcribed Image Text:On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the
effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Provide the answers to the following questions.
(1) What amount of interest expense is reported for 2021? (Round answer to 0 decimal places, e.g, 38,548.)
Interest expense reported for 2021 $
(2) Will the bond interest expense reported in 2021 be the same as, greater than, or less than the amount that would be
reported if the straight-line method of amortization were used?
The bond interest expense reported in 2021 will be greater thane the amount that would be reported if the straight-line me
(3) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.)
Total cost of borrowing over the life of the bondS
(4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest
expense if the straight-line method of amortization were used?
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