Question 15 A company issued 8%, 15-year bonds with a par value of $550,000. The
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Question 15
A company issued 8%, 15-year bonds with a par value of $550,000. The current market rate is 8%. Prepare the journal entry to record each semiannual interest payment.
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10 points
Question 16
A company issued 9%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The market interest rate on the issue date was 10%, and the issuer received $95,016 cash for the bonds. On the first semiannual interest date, what amount of cash should be paid to the holders of these bonds for interest?
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10 points
Question 17
What is a lease? Explain the difference between an operating lease and a capital lease.
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Explanation / Answer
Operating and capital Lease difference ;
1. Operating Lease: In this lease arrangement , the ownership of the asset remains with the lessor , lessee only uses the asset. The depreciation on the asset is claimed by lessor. The lessee can claim the deduction of the rental amount as expense.
2. In Capital lease , the asset is transferred by lessor to the lessee at the end of the lease period. The assets generally have longer life and the lease period is generally greater than 75% of the economic life of the asset.
The lease has an option of a bargain purchase by the lessee. Generally the risk and reward of the asset is transferred to the lessess who claims the depreciation expense also. However the legal title passes to the lessee at the end of the lease period.
a Bond Par value 550,000.00 Interest rate 8% As coupon rate & market rate are same , the bond is sold at par Semi annual Interest @ 4% 22,000.00 Journal entry Date Account Title Dr $ Cr $ Interest Expense 22,000.00 Cash 22,000.00 b Bond Par value 100,000.00 Coupon rate 9% Semi annual Coupon payment@4.5% 4,500.00 So on first semi annual payment an amount of $ 4,500 will be payable to bond holders.Related Questions
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