Intel Inc. is the pioneer in the manufacture of microprocessor for computers. Th
ID: 2469841 • Letter: I
Question
Intel Inc. is the pioneer in the manufacture of microprocessor for computers. The company's fiscal year runs from April 1 to March 31. On 4/1/2015, Intel Issued $5,000,000 of 11% Bonds due in 10 years. The interest is payable annually on April 1. The market rate of interest on that date for bonds of similar risk is 10%.
Identify the entry for debit to Interest Payable for 550,000 and credit to cash for same on April 1, 2016 in creating a the journal entry for the issuance of the bonds and on the first interest payment date. PLEASE DO NOT ANSWER THIS QUESTION WITH WITHOUT INCLUDING THE INFORMATION HIGHLIGHTED IN BOLD.
Explanation / Answer
N= 10% , t= 10 years
FV = 5,000,000 * .38554 = $1,927,700
Interest 550,000 * 6.14457 = 3,379,514
Total present value = $5,307,214
Interest expense
(5307214@10%
530,722
Premium on bonds
19,278
To interest payable
$550,000
N= 10% , t= 10 years
FV = 5,000,000 * .38554 = $1,927,700
Interest 550,000 * 6.14457 = 3,379,514
Total present value = $5,307,214
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