On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses theeffective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.Provide the answers to the following questions.(1) What amount of interest expense is reported for 2021? (Round answer to 0 decimal places, e.g, 38,548.)Interest expense reported for 2021 $(2) Will the bond interest expense reported in 2021 be the same as, greater than, or less than the amount that would bereported if the straight-line method of amortization were used?The bond interest expense reported in 2021 will be greater thane the amount that would be reported if the straight-line me(3) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.)Total cost of borrowing over the life of the bondS(4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interestexpense if the straight-line method of amortization were used?

Face value of bonds= $3990000 No of years=20 years interest rate= 14% Yield rate= 12% Cash received…

On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 7P: Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued...

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Question

On June 30, 2020, Pearl Company issued $3,990,000 face value of 14%, 20-year bonds at $4,590,340, a yield of 12%. Pearluses the
effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.
Provide the answers to the following questions.
(1) What amount of interest expense is reported for 2021? (Round answer to 0 decimal places, e.g, 38,548.)
Interest expense reported for 2021 $
(2) Will the bond interest expense reported in 2021 be the same as, greater than, or less than the amount that would be
reported if the straight-line method of amortization were used?
The bond interest expense reported in 2021 will be greater thane the amount that would be reported if the straight-line me
(3) Determine the total cost of borrowing over the life of the bond. (Round answer to 0 decimal places, e.g. 38,548.)
Total cost of borrowing over the life of the bondS
(4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest
expense if the straight-line method of amortization were used?

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