A Company Issued 10%,five-Year Bonds with a Par Value of $2,000,000,on

question 17

Essay

A company issued 10%,five-year bonds with a par value of $2,000,000,on January 1,2013.Interest is to be paid semiannually each June 30 and December 31.The bonds were sold at $2,162,290 to yield the buyers an 8% annual return.The company uses the effective interest method of amortization.
(1)Prepare an amortization table for the first two semiannual payment periods using the format shown below.
$$\begin{array} { |c | c | c | c | c | c| } \hline \begin{array} { c } \text { Semiannuual } \\\text { Interest } \\\text { Period }\end{array} & \begin{array} { c } \text { Cash Interest } \\\text { Paid }\end{array} & \begin{array} { c } \text { Bond Interest } \\\text { Expense }\end{array} & \begin{array} { c } \text { Premium } \\\text { Amortization }\end{array} & \begin{array} { c } \text { Unamortized } \\\text { Premium }\end{array} & \begin{array} { c } \text { Carrying } \\\text { Value }\end{array} \\\hline\end{array}$$
(2)Prepare the general journal entry to record the first semiannual interest payment.

Recognize arguments for and against the use of lotteries as a means of funding government services.

Comprehend the concept of tax shifting and its implications for different taxes.

Interpret the circular flow model to understand government's role in the economy.

Differentiate between government purchases and transfer payments in terms of their impact on resource allocation.

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Definitions:

Depreciation

The accounting method of allocating the cost of a physical or tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

EBIT

A financial metric that calculates a company's profit by including all costs except for interest and income tax expenses, known as Earnings Before Interest and Taxes.

Free Cash Flow

The amount of cash a company generates after accounting for capital expenditures needed for operations. It is an important measure of financial performance and liquidity.

Capital Expenditures

Long-term investments made by a company in buildings, equipment, or other assets to improve or maintain its business operations.