Week 4 class 2

Week 4 class 2 - Week 4 class 2(10 min 1 Borrowed $435,000 Pay back $500,000 at maturity Pay cash interest of $17,500 each six months Interest

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Week 4 class 2 (10 min.) CP 8-10 1. Borrowed $435,000 Pay back $500,000 at maturity 2. Pay cash interest of $17,500 each six months. 3. Interest expense: July 31, 2007…………………. $19,575 Jan. 31, 2008…………………. $19,668 Interest expense increases because the bond carrying amount increases as the bonds move toward maturity. An increasing bond carrying amount produces an increasing amount of interest expense each period. (10 min.) CP 8-12
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DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 2006 a. July 1 Cash ($5,000 × 0.96)……………………… 4,800 Discount on Bonds Payable……………. .. 200 Bonds Payable……………………. 5,000 To issue bonds at a discount. b. Dec. 31 Interest Expense…………………………… 173 Discount on Bonds Payable ($200 / 10 × 6/12)…………………. 10 Interest Payable ($5,000 × 0.065 × 6/12). 163 To accrue interest and amortize bond discount. 2007
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This note was uploaded on 10/18/2010 for the course ACF ACC220 taught by Professor Fiona during the Spring '08 term at Seneca.

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Week 4 class 2 - Week 4 class 2(10 min 1 Borrowed $435,000 Pay back $500,000 at maturity Pay cash interest of $17,500 each six months Interest

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