Problem #4: Bonds (1 point) What is the contractual interest rate of the followi

Question

Problem #4: Bonds (1 point) What is the contractual interest rate of the following bond? After 1 year: Face Value of Bond: $2,500,000 Interest Expense to be recorded: $290,000 Premium amortization in year 1: $10,000 Market Interest Rate: 10% Problem #5: Payroll and Payroll Taxes Payable (1 points) All Star Corporation's employees earned $70,000 in Aus 2011 The withholdings related to res were $7,392 for federal income tax, $5,380 for Social Securi for state income tax, Prepare the August 31, 2014 journal entry to record the salaries and wages eapense. these wages taxes, $3,500 August . and $230 for federal taxes. , $400 for state

Explanation / Answer

Problem # 4 : Interest payment = Interest expense + Premium amortization

Therefore annual interest payment = 290,000 + 10,000 = $ 300,000

Hence contractual interest rate = Annual coupon / Face value of bonds = 300,000 / 2,500,000 x100 = 12%

Problem # 5 :

Problem # 6 :

Account Titles Debit Credit $ $ Salaries and wages expense 70,000 Federal income tax payable 7,392 Social security payable 5,380 State unemployment tax payable 400 State income tax payable 3,500 Federal unemployment tax payable 230 Cash 53,098

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