Examlex
Quagle Company had the following transactions pertaining to debt investments.
2017
Jan. 1 Purchased 40 8% $1000 Steve Company bonds for $40000 cash. Interest is payable annually on January 1.
Dec. 31 Accrued annual interest on Steve Company bonds.
2018
Jan. 1 Received interest from Steve Company bonds.
Jan. 1 Sold 24 Steve Company bonds for $26000.
Instructions
Journalize the transactions.
Interest Tax Shield
The reduction in income taxes that results from the deductibility of interest expense from taxable income.
Capital Structure
The mix of debt and equity financing a company uses for its operations and growth.
Optimal Capital Structure
Optimal capital structure is the mix of debt, equity, and other financing sources that minimizes a firm's cost of capital and maximizes shareholder value, balancing risk and return.
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