Prepare the wage entry for July

Assignment Help Accounting Basics

Reference no: EM132647359

Questions -

Q1. Company Alfa issued bonds with a par value of $ 60 million and a nominal interest rate of 7%. The bonds pay interest every six months on January 1 and July 1. They were issued on July 1, 2019 and on that date had a duration of 15 years. On the issuance date, the market interest rate (yield) was 8.5%.

1. Prepare the wage entry to record the issuance of the bonds on July 1, 2019.

2. Prepare the wage entry for July 1, 2020.

3. If with five years (10 semesters) until the bonds expire, the company withdraws them in the amount of $ 62 million, calculate the gain or loss on the withdrawal of the bonds.

Q2. Assume the same data from Exercise 1, except that the bonds do NOT pay periodic interest.

1. Prepare the journal entry to record the issuance of the bonds on July 1, 2019.

2. Prepare the wage entry for July 1, 2021.

3. If, with five years until the bonds mature, the company withdraws them in the amount of $ 43 million, calculate the gain or loss on the withdrawal of the bonds.

Q3. Beta bought a computer at a cost of $ 45,000. To finance the purchase, she signed a five-year promissory note, which requires five equal annual payments. Beta will make the first payment in a year. Each payment will be in the amount of $ 12,795.

1. Determine the interest rate on this note.

2. Prepare the wage entries Beta will do for the first payment and for the last payment.

3. Suppose that immediately after making the second payment, Beta refinances and signs a new three-year note for the amount owed on the first note and the interest rate is 10.25%, how much will be the annual payment of the new note .

Q4. Suppose the note from the previous year carries an interest rate of 12% and Beta will pay $ 10,000 annually over the five years of the note. At the end of year 5, in addition to the $ 10,000, Beta will pay an additional amount.

1) What additional amount will Beta have to pay to pay off the promissory note?

2) How much will Beta owe after making the third annual payment?

3) What is the wage entry for the fifth payment, including the amount calculated in question (1)?

Reference no: EM132647359

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