S Strigel Chemical

S Strigel Chemical - Semiannual interest payments($5,000,000 X 10 X 1/2 = $250,000 X 20 $5,000,000 Less Bond premium($5,679,533 – $5,000,000

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(1) The amount of interest expense reported for 2007 related to these bonds is $451,588 ($226,269 + $225,319). (2) When the bonds are sold at a premium, the effective-interest method will result in more interest expense reported than the straight-line method in 2007. Straight-line interest expense for 2007 is $432,046 [$250,000 + $250,000 – ($33,977 + *$33,977)]. *$679,533 ÷ 20 (3) The total cost of borrowing is as shown below:
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Unformatted text preview: Semiannual interest payments ($5,000,000 X 10% X 1/2) = $250,000 X 20. ..................................... $5,000,000 Less: Bond premium ($5,679,533 – $5,000,000). ................................ 679,533 Total cost of borrowing. .............................................................. $4,320,467 (4) The total bond interest expense over the life of the bonds is the same under either method of amortization....
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This note was uploaded on 04/04/2009 for the course ACC 321 taught by Professor Ahmedmokhtar during the Spring '09 term at Ain Shams University.

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