Timchak Corporation reports that at an activity level of 9,900 units, its total variable cost is $919,116 and its total fixed co

Answer:

1. Record the journal entry to log the cash received from bond issuance on July 1, Year 1.

Dr Cash 37,282,062

Dr Discount on bonds payable 2,717,938

    Cr Bonds payable 40,000,000

2. Make the following journal entries:

a. Document the first semiannual interest payment on December 31, Year 1, along with the bond discount amortization, utilizing the straight-line approach. Round to the nearest dollar.

discount on bonds payable = 2,717,938 / 20 coupons = $135,896.90

December 31, Year 1, first coupon payment

Dr Interest expense 1,535,896.90

    Cr Cash 1,400,000

    Cr Discount on bonds payable 135,896.90

b. Capture the interest payment on June 30, Year 2, and the bond discount amortization, again utilizing the straight-line method. Round to the nearest dollar.

June 30, Year 2, second coupon payment

Dr Interest expense 1,535,896.90

    Cr Cash 1,400,000

    Cr Discount on bonds payable 135,896.90

3. Calculate the total interest expense for Year 1.

$1,535,896.90

4. When the bond proceeds are consistently lower than the bond face value if the contract rate is lower than the market rate of interest?

yes, if the market rate exceeds the coupon rate, the bonds will be issued at a discount.

5. (Appendix 1) Calculate the receipt price of $37,282,062 for the bonds by referring to the present value tables found in Appendix A at the conclusion of the textbook. Round to the nearest dollar.

bond price = PV of face value + PV of coupon payments

• PV of face value = $40,000,000 x 0.4564 (PV factor, 4%, 20 periods) = $18,256,000
• PV of coupon payments = $1,400,000 x 13.590 (PV annuity factor, 4%, 20 periods) = $19,026,000

bond's market price = $18,256,000 + $19,026,000 = $37,282,000

Answer:

Economically speaking, Carl's business outlook is subject to variations in the currency values of the US and China.

Explanation:

• The agreement that Carl plans to propose is sensitive to the fluctuation that occurs if the Chinese Yuan depreciates against the US dollar after he begins selling the bicycle horns, which could result in financial losses for him.
• Thus, whether Carl will gain a profit or suffer a loss hinges entirely on the exchange rates of the two currencies.

Response:

advertising expense 387 debit

prepaid expense 387 credit

--to document expired advertising at the year's end ---

Details:

1,548 represents the value over 36 months

From April to December 31, 9 months have elapsed thus:

1,548 x 9/36 = 387 expired advertising

We will reduce our prepaid account and record the advertising expense for the expired amount

The prepaid expense is classified as an asset since it grants us the right to receive advertising for our product and brand during the contract period. Therefore, we credit it to decrease it

while the expense will debit our equity

Answer: Tom would incur $2,970. in interest beyond repaying his principal of $9000.

To calculate the interest owed on the principal over a specified timeframe at a defined interest rate, we use the simple interest formula.

This Simple Interest Formula is:

where

A = interest earned on the principal

P = the principle or the amount borrowed

r = interest rate

t = the duration in years for which interest is accrued.