A company sold a $1,000,000 issue of bonds with a 15-year life, paying 4% interest per year. The bonds were sold at par value. If the company paid a selling fee of $50,000 and has an annual expense of $70,256 for mailing and record keeping, what is the true rate of interest that the company is paying for the borrowed money?
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A company sold a $1,000,000 issue of bonds with a 15-year life, paying 4% interest per year. The bonds were sold at par value. If the company paid a selling fee of $50,000 and has an annual expense of $70,256 for mailing and record keeping, what is the true rate of interest that the company is paying for the borrowed money?
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- Superior Drive-Ins Ltd. borrowed money by issuing $4,500,000 of 6% bonds payable at 96.5 on July 1, 2018. The bonds are 10-year bonds and pay interest each January 1 and July 1. Requirements 1. How much cash did Superior receive when it issued the bonds payable? Journalize this transaction. 2. How much must Superior pay back at maturity? When is the maturity date? 3. How much cash interest will Superior pay each six months? 4. How much interest expense will Superior report each six months? Use the straight-line amortization method. Journalize the entries for the accrual of interest and amortization of discount on December 31, 2018, and the payment of interest on January 1, 2019.Butler, Inc. paid $90,000 to retire a note with a face value of $99,600 . The note was issued with an 8% coupon rate paid semiannually. The note was three years from maturity and had a net book value of $81,840 . What is the net gain or loss on the redemption of the note? Select one: a. $9,600 loss b. $9,600 gain c. $8,160 gain d. $8,160 loss e. None of these are corrThe Smart Company sold Rs. 500,000 of 8 percent, 20-year bonds on April 1, 2011, at 105. The semiannual interest payment dates are March 31 and September 30. The market interest rate is 7.5 percent. The company's fiscal year ends September 30. Use the effective interest method to calculate the amortization. With regard to the bond issue on April 1, 2011: How much cash is received? How much is Bonds Payable? What is the difference between a and b called and how much is it? With regard to the bond interest payment on September 30, 2011: How much cash is paid in interest? How much is the amortization? How much is interest expense? With regard to the bond interest payment on March 31, 2012: How much cash is paid in interest? How much is the amortization? How much is interest expense?
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