Question

On January 1 of Year 1, Congo Express Airways issued $4,900,000 of 7%, bonds that pay...

On January 1 of Year 1, Congo Express Airways issued $4,900,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $4,463,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $11,500 every 6 months. The life of these bonds is:

A. 39 years

B. 19 years

C. 43 years

D. 38 years

E. 13 years

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer :-

Face value of bond = $4,900,000

Issue price of bond = $4,463,000

Discount on bond = Face value of bond - Issue price of bond

Discount on bond = $4,900,000 - $4,463,000

Discount on bond = $437,000

In the question it was given that,  The bond discount is amortized using the straight-line method at a rate of $11,500 for every 6 months.

Annual Amortization = $11,500 × 2

Annual Amortization = $23,000

Life of Bonds = Discount on bond / Annual Amortization

Life of Bonds = $437,000 / $23,000

Life of bonds = 19 years

The Correct answer is Option B - 19 years.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1 of Year 1, Congo Express Airways issued $3,800,000 of 7%, bonds that pay...
On January 1 of Year 1, Congo Express Airways issued $3,800,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,432,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $11,500 every 6 months. The life of these bonds is: Multiple Choice 30 years 16 years. 32 years. 11 years. 33 years.
On January 1 of Year 1, Congo Express Airways issued $3,400,000 of 7% bonds that pay...
On January 1 of Year 1, Congo Express Airways issued $3,400,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,100,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,000 every six months. After accruing interest at year end, the company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue...
On January 1 of Year 1, Congo Express Airways issued $2,500,000 of 5% bonds that pay...
On January 1 of Year 1, Congo Express Airways issued $2,500,000 of 5% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $2,260,000 and the market rate of interest for similar bonds is 6%. The bond premium or discount is being amortized at a rate of $8,000 every six months. After accruing interest at year end, the company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue...
14A. Martin Company purchases a machine at the beginning of the year at a cost of...
14A. Martin Company purchases a machine at the beginning of the year at a cost of $135,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $11,250 salvage value. Depreciation expense in year 4 is: 14B. On January 1 of Year 1, Congo Express Airways issued $4,400,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,994,000 and the market...
A company issued $600,000 of 13%, ten-year convertible bonds on January 1, 2020 at 107, with...
A company issued $600,000 of 13%, ten-year convertible bonds on January 1, 2020 at 107, with interest payable July 1 and January 1. Bond discount/premium is amortized semiannually on a straight-line basis. How much interest expense should the company record on June 30, 2020? (If there is no interest expense to be recorded, then enter 0.)
1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a...
1. On January 1 of the current year, the Queen Corporation issued 9% bonds with a face value of $81,000. The bonds are sold for $78,570. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Queen records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31. 2. The Marx Company issued $88,000 of 12% bonds on April 1 of...
6. On January 1, 2019, Larkspur Corporation issued $500,000, 10%, 5-year bonds, at 98. The bonds...
6. On January 1, 2019, Larkspur Corporation issued $500,000, 10%, 5-year bonds, at 98. The bonds pay semiannual interest on January 1 and July 1. The company uses the straight-line method of amortization for bond premium and discount. Prepare all of the journal entries that Larkspur Corporation would make related to this bond issue on a) The January 1, 2019 issue date. b) The July 1, 2019 interest payment date. c) Based on the above information, what was the carrying...
On July 1, 2023, Smith Company issued 600 of its 7%, $1,000 bonds. The bonds were...
On July 1, 2023, Smith Company issued 600 of its 7%, $1,000 bonds. The bonds were issued to yield 12%. The bonds are dated July 1, 2023, and mature on July 1, 2033. Interest is payable semiannually on January 1 and July 1. Using the effective interest method, how much of the bond discount should be amortized for the 6 months ended December 31, 2023?
Presto Company issued $240,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable...
Presto Company issued $240,000, 9%, 20-year bonds on January 1, 2012, at 103. Interest is payable semiannually on July 1 and January 1. Presto uses straight-line amortization for bond premium or discount. Interest is not accrued on June 30. Instructions: Prepare the journal entries to record the following. a. The issuance of the bonds. b. The payment of interest and the premium amortization on July 1, 2012. c. The accrual of interest and the premium amortization on December 31, 2012....
Cassius Corporation issued $2,000,000, 10 year, 6% bonds on January 1, 2019. The bonds pay interest...
Cassius Corporation issued $2,000,000, 10 year, 6% bonds on January 1, 2019. The bonds pay interest annually on January 1. 1. What is the annual interest payment? 2. How many interest payment periods are there? 3 If the bonds sold at 98% of face value? 4. Did they sell at a discount or premium? 5. What is the discount or premium amount? 6. How much of the discount or premium would be amortized on each interest payment period? 7 If...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT