A company issued 12% bonds, dated January 1, with a face amount of $620 million on January 1, Year 1. The bonds mature in Year 11 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest expense is recorded at the effective interest rate. Interest is paid semiannually on June 30 and December 31. The company recorded the sale as follows: January 1, Year 1 Cash (price) General Journal Discount on bonds (difference) Bonds payable (face amount) Required: Debit 554,317,572 65,682,428 Credit 620,000,000 What would be the amount(s) related to the bonds that the company would report in its statement of cash flows for the year ended December 31, Year 1? Note: Cash outflows should be indicated with a minus sign. Enter your answers in whole dollars and not in millions.
A company issued 12% bonds, dated January 1, with a face amount of $620 million on January 1, Year 1. The bonds mature in Year 11 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest expense is recorded at the effective interest rate. Interest is paid semiannually on June 30 and December 31. The company recorded the sale as follows: January 1, Year 1 Cash (price) General Journal Discount on bonds (difference) Bonds payable (face amount) Required: Debit 554,317,572 65,682,428 Credit 620,000,000 What would be the amount(s) related to the bonds that the company would report in its statement of cash flows for the year ended December 31, Year 1? Note: Cash outflows should be indicated with a minus sign. Enter your answers in whole dollars and not in millions.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 7MCQ
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Question
![A company issued 12% bonds, dated January 1, with a face amount of $620 million on January 1, Year 1. The bonds
mature in Year 11 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest expense is
recorded at the effective interest rate. Interest is paid semiannually on June 30 and December 31. The company
recorded the sale as follows:
January 1, Year 1
Cash (price)
General Journal
Discount on bonds (difference)
Bonds payable (face amount)
Required:
Debit
554,317,572
65,682,428
Credit
620,000,000
What would be the amount(s) related to the bonds that the company would report in its statement of cash flows for
the year ended December 31, Year 1?
Note: Cash outflows should be indicated with a minus sign. Enter your answers in whole dollars and not in
millions.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa68fb0a6-517c-4371-a656-9542a99957a6%2F0343157d-0307-4c8c-9b19-f86fc3a194cb%2Fiysji4a_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A company issued 12% bonds, dated January 1, with a face amount of $620 million on January 1, Year 1. The bonds
mature in Year 11 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest expense is
recorded at the effective interest rate. Interest is paid semiannually on June 30 and December 31. The company
recorded the sale as follows:
January 1, Year 1
Cash (price)
General Journal
Discount on bonds (difference)
Bonds payable (face amount)
Required:
Debit
554,317,572
65,682,428
Credit
620,000,000
What would be the amount(s) related to the bonds that the company would report in its statement of cash flows for
the year ended December 31, Year 1?
Note: Cash outflows should be indicated with a minus sign. Enter your answers in whole dollars and not in
millions.
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