A. Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount o

Question

A. Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $900 million on July 1, 2016, at a price of $890 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. a. Prepare the journal entry to record interest at the effective interest rate at December 31.

What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2016, if it uses the direct method? (List any cash outflows with a minus sign. Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) ($ in millions)

Explanation / Answer

Account Titles and Explanation Debit Credit Interest Exp (890 mln * 0.1 * 1/2) 44500000 Discount on bond payable 4000000 Cash (900 mln * 1/2 * .09) 40500000

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