On June 30, 2018, Gunderson Electronics Issued 8% Stated Rate

question 89

Essay

On June 30, 2018, Gunderson Electronics issued 8% stated rate bonds with a face amount of $300 million. The bonds mature on June 30, 2038 (20 years). The market rate of interest for similar bond issues was 10% (5% semiannual rate). Interest is paid semiannually (4%) on June 30 and December 31, beginning on December 31, 2018.
Required:
a. Determine the price of the bonds on June 30, 2018.
b. Calculate the interest expense Gunderson reports in 2018 for these bonds.

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Definitions:

Process Costing System

A costing method used in production environments where similar products are mass-produced, allocating costs over the whole production process.

Equivalent Units

A concept used in cost accounting to convert partially completed units of production into a number of fully completed equivalent units.

Process Costing System

A process costing system is an accounting method used to allocate costs to units of product in continuous or repetitive processes, suitable for industries producing homogeneous products.

Conversion Costs

Conversion costs are manufacturing expenses incurred in converting raw materials into finished products, including direct labor and manufacturing overhead.