Warner Company Issued $4,000,000 of 6%, 10-Year Bonds on One

question 131

Multiple Choice

Warner Company issued $4,000,000 of 6%, 10-year bonds on one of its interest dates for $3,454,800 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a

• A) debit to Bond Interest Expense for $240,000.
• B) credit to Cash for $276,385.
• C) credit to Discount on Bonds Payable for $36,384.
• D) debit to Bond Interest Expense for $320,000.

Calculate the duration of loans and savings plans.

Calculate the term of an ordinary annuity in years and months.

Determine the financial impact of additional payments towards a mortgage including interest savings and term reduction.

Use a financial calculator to determine the term of ordinary annuities.

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Definitions:

Negative Income Tax

A welfare system proposed to provide income support to individuals or families that earn below a certain level, effectively subsidizing their income to reach a minimum threshold.

In-kind Transfers

Non-cash payments or goods and services provided to individuals as part of government assistance programs, instead of cash.

Cash Payments

are transactions where the exchange of goods or services occurs via the physical exchange of currency, as opposed to credit or digital payment.

Minimum-wage Law

Rules determining the minimum legal hourly pay rate for employees by their employers.