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A531-3UFS

A531-3UFS - Requiremnt(a The net amount of cash received by...

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Requiremnt (a) The net amount of cash received by the Wilkie for the bonds issuance is calculated below: Name: Umme Fatema Siddique Student Number: 805 936 291 Issuing Price of bonds [$4 million x 103%] $4,120,000 Course Code/Number: ACCT 531 Add: Accrued Interest on Jan and Feb 2012 Assignment Number: 3 [$4 million x 9% x 2/12] $60,000 Cash Reciept from bond Issuance $4,180,000 Deduct: Bond Issuance Cost $(27,000) Net Amount of Cash Received $4,153,000 Requiremnt (b) If Langley Ltd. Uses effective interest method for bond amortization, the inetrest expense for 2011 will be calculated by multiplying the carrying value of the bonds at the beginning of the period by the effective interest rate, which is 10% yield. [pg. 916] Carrying amount of bonds on Jan 1, 2011 $469,280 (X) Effective Interest rate 10% Interest Expense for 2011 $46,928 Effective Interest Rate method is generally required under IFRS and allowed as an accounting policy choice under private entity GAAP. But Langley ltd. Can also choose to use straight line mathod in this case because in this method the discount is amortized and charged to interest expense over the life of the bonds. This mehtod is used to maintain simplicity of calculations, so Langley ltd. Can also choose this method.
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A531-3UFS - Requiremnt(a The net amount of cash received by...

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