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Impact of a Premium
Berol Corporation sold 20-year bonds on January 1, 2016. The face value of the bonds was $100,000, and they carry a 9% stated rate of interest, which is paid on December 31 of every year. Berol received $109,330 in return for the issuance of the bonds when the market rate was 8%. Any premium or discount is amortized using the effective interest method.
Required:
1. Prepare the journal entry to record the sale of the bonds on January 1, 2016. How does this entry affect the accounting equation?
Prepare a proper balance sheet presentation for January 1, 2016.
2. Prepare the journal entry to record interest expense on December 31, 2016. How does this entry affect the accounting equation? If required, round your answers to the nearest dollar.
Prepare a proper balance sheet presentation for December 31, 2016.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
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