Premium payable 1813507 cash 4231252 if you issue

Info icon This preview shows pages 2–4. Sign up to view the full content.

                              Premium Payable                    1,813,507                                                       Cash                            4,231,252 If you issue $10,000,000, 30 year callable bonds at a 5% discount, with a call  feature at 10 years, what effect will this have on interest expense the first ten  years? Provide journal entries and a comparative table to explain the  differences.   Par Value              $10,000,000 Stated Rate           5% Market Rate          7% Annual Payment   $500,000 Maturity                30 years           Call Date               December 31, 2048 Carrying Value     $7,518,192 Discount               $2,481,808 Journal Entry at issue    12/31/2018            Cash                                                    7,518,192                               Discount on Payable                          2,481,808
Image of page 2

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

                                                      Bonds Payable                        10,000,000      Date Interest 5% Effective 7% Premium Carrying Value 7,518,192 12/31/18 500,000 526,273 26,273 7,544,465 12/31/19 500,000 528,113 28,113 7,572,578 12/31/20 500,000 530,080 30,080 7,602,658 12/31/21 500,000 532,186 32,186 7,634,845 12/31/22 500,000 534,439 34,439 7,669,284 12/31/23 500,000 536,850 36,850 7,706,134 12/31/24 500,000 539,429 39,429 7,745,563 12/31/25 500,000 542,189 42,189 7,787,752 12/31/26 500,000 545,143 45,143 7,832,895 12/31/27 500,000 548,303 48,303 7,881,198 12/31/28 500,000 551,684 51,684 7,932,881 Journal Entry at Call              12/31/2018      Interest Expense          5,551,684                                                 Cash                                        5,000,000                                                 Discount Bond Payable              551,684 References: Gordon, E. A., Raedy, J. S., & Sannella, A. J. (2016). 
Image of page 3
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.
  • Spring '10
  • TimathyCrawford
  • Accounting, Professor Forde, Bond Payable, Collapse Subdiscussion

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern