Potter Corporation issued $500,000 of 5%, 12-year bonds payable on March 31, 2019. The market interest rate at the date of issuance was 8%, and the bonds pay interest semiannually. Potter Corporation's year-end is March 31. Review the following amortization table for Potter's bonds: Reference Semiannual Interest Date Interest Payment Interest Expense Discount Amortization Discount Balance Bond Carrying Amount Mar 31, 2019 $114,352 $385,648 Sep 30, 2019 $12,500 $15,426 $2,926 111,426 388,574 Mar 31, 2020 12,500 15,543 3,043 108,383 391,617 Sep 30, 2020 12,500 15,665 3,165 105,218 394,782 Requirements Using the amortization table for Potter's bonds, answer the questions below: 1. How much cash did Potter Corporation borrow on March 31, 2019? How much cash will the company pay back at maturity on March 31, 2031? 2. How much cash interest will the company pay each six months? 3. How much interest expense will Potter Corporation report on September 30, 2019, and on March 31, 2020? Why does the amount of interest expense increase each period?
Potter Corporation issued $500,000 of 5%, 12-year bonds payable on March 31, 2019. The market interest rate at the date of issuance was 8%, and the bonds pay interest semiannually. Potter Corporation's year-end is March 31. Review the following amortization table for Potter's bonds: Reference Semiannual Interest Date Interest Payment Interest Expense Discount Amortization Discount Balance Bond Carrying Amount Mar 31, 2019 $114,352 $385,648 Sep 30, 2019 $12,500 $15,426 $2,926 111,426 388,574 Mar 31, 2020 12,500 15,543 3,043 108,383 391,617 Sep 30, 2020 12,500 15,665 3,165 105,218 394,782 Requirements Using the amortization table for Potter's bonds, answer the questions below: 1. How much cash did Potter Corporation borrow on March 31, 2019? How much cash will the company pay back at maturity on March 31, 2031? 2. How much cash interest will the company pay each six months? 3. How much interest expense will Potter Corporation report on September 30, 2019, and on March 31, 2020? Why does the amount of interest expense increase each period?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
100%
Potter
Corporation issued
$500,000
of
5%,
12-year
bonds payable on March 31,
2019.
The market interest rate at the date of issuance was
8%,
and the bonds pay interest semiannually.
Potter
Corporation's year-end is March 31. Review the following amortization table for
Potter's
bonds:
Reference
|
Semiannual Interest Date
|
Interest Payment
|
Interest Expense
|
Discount Amortization
|
Discount Balance
|
Bond Carrying Amount
|
|---|---|---|---|---|---|
|
Mar 31, 2019
|
|
|
|
$114,352
|
$385,648
|
|
Sep 30, 2019
|
$12,500
|
$15,426
|
$2,926
|
111,426
|
388,574
|
|
Mar 31, 2020
|
12,500
|
15,543
|
3,043
|
108,383
|
391,617
|
|
Sep 30, 2020
|
12,500
|
15,665
|
3,165
|
105,218
|
394,782
|
Requirements
Using the amortization table for
Potter's
bonds, answer the questions below:|
1.
|
How much cash did
Potter
Corporation borrow on March 31,
2019?
How much cash will the company pay back at maturity on March 31,
2031?
|
|
2.
|
How much cash interest will the company pay each six months?
|
|
3.
|
How much interest expense will
Potter
Corporation report on September 30,
2019,
and on March 31,
2020?
Why does the amount of interest expense increase each period? |
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