ou have the following information for Brophy, Inc. December 31 Long-Term Debt ($ in millions) Year 2 Year 1 7% debentures, $300 million face value, due Year 11, effective rate $14.6% $ 188.6 $ 182.7 Zero coupon bonds, $500 million face value, due Year 8, effective rate 12.0% 267.9 239.2 Mortgage debt, $850 million face value, due Year 5, effective rate 8.7%, secured by corporate headquarters 834.5 833.9 Various other long-term debt 12,444.2 16,329.2 Total long-term debt $ 13,735.2 $ 17,585.0 Assume the interest for all the bonds are based on annual basis. Required: How much interest expense did the company record during Year 2 on the 7% debentures? How much of the original issue discount was amortized during Year 2? How much interest expense did the company record during Year 2 on the zero coupon bonds? Suppose that interest payments on the mortgage are made on December 31 of each year. What journal entry did the company make in Year 2 to recognize interest expense on this debt? How much cash interest did the company pay out during Year 2 on the 7% debentures and the zero coupon bonds?
ou have the following information for Brophy, Inc. December 31 Long-Term Debt ($ in millions) Year 2 Year 1 7% debentures, $300 million face value, due Year 11, effective rate $14.6% $ 188.6 $ 182.7 Zero coupon bonds, $500 million face value, due Year 8, effective rate 12.0% 267.9 239.2 Mortgage debt, $850 million face value, due Year 5, effective rate 8.7%, secured by corporate headquarters 834.5 833.9 Various other long-term debt 12,444.2 16,329.2 Total long-term debt $ 13,735.2 $ 17,585.0 Assume the interest for all the bonds are based on annual basis. Required: How much interest expense did the company record during Year 2 on the 7% debentures? How much of the original issue discount was amortized during Year 2? How much interest expense did the company record during Year 2 on the zero coupon bonds? Suppose that interest payments on the mortgage are made on December 31 of each year. What journal entry did the company make in Year 2 to recognize interest expense on this debt? How much cash interest did the company pay out during Year 2 on the 7% debentures and the zero coupon bonds?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
You have the following information for Brophy, Inc.
| December 31 | ||||||
| Long-Term Debt ($ in millions) | Year 2 | Year 1 | ||||
| 7% debentures, $300 million face value, due Year 11, effective rate $14.6% | $ | 188.6 | $ | 182.7 | ||
| Zero coupon bonds, $500 million face value, due Year 8, effective rate 12.0% | 267.9 | 239.2 | ||||
| Mortgage debt, $850 million face value, due Year 5, effective rate 8.7%, secured by corporate headquarters | 834.5 | 833.9 | ||||
| Various other long-term debt | 12,444.2 | 16,329.2 | ||||
| Total long-term debt | $ | 13,735.2 | $ | 17,585.0 | ||
Assume the interest for all the bonds are based on annual basis.
Required:
- How much interest expense did the company record during Year 2 on the 7% debentures? How much of the original issue discount was amortized during Year 2?
- How much interest expense did the company record during Year 2 on the zero coupon bonds?
- Suppose that interest payments on the mortgage are made on December 31 of each year. What
journal entry did the company make in Year 2 to recognize interest expense on this debt? - How much cash interest did the company pay out during Year 2 on the 7% debentures and the zero coupon bonds?
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