The June Bug Has a $270,000 Bond Issue Outstanding

question 95

Multiple Choice

The June Bug has a $270,000 bond issue outstanding.These bonds have a 7.5 percent coupon,pay interest semiannually,and have a current market price equal to 98.6 percent of face value.The tax rate is 39 percent.What is the amount of the annual interest tax shield?

• A)$3,948.75
• B)$4,112.60
• C)$5,311.22
• D)$7,897.50
• E)$8,225.20

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Definitions:

Accounts Payable

Accounts Payable is a liability account on a company's balance sheet representing money owed to suppliers or creditors for goods and services received but not yet paid for.

Trial Balance

A bookkeeping report that lists the balances of all ledgers accounts to check that debits equal credits in the double-entry accounting system.

Debits

Debits refer to an accounting entry that results in either an increase in assets or expenses or a decrease in liabilities or equity on a company's balance sheet.

Ledger

A Ledger is a book or collection of accounts in which account transactions are recorded, classified, and summarized.