Connect CSecure https//newconnect.mheducation.com/flow/connect.html Ch. 21 - Bri

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Connect CSecure https//newconnect.mheducation.com/flow/connect.html Ch. 21 - Brief Exercises (60 minutes) Help Save & Exlt Submlt Saved 3 Check my work Brief Exercise 21-5 Bond interest and discount [LO21-3, 21-6] Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1.400 million on July 1, 2018, at a price of $1.370 million. For bonds of similar risk and maturity. the market yield is 10%. Interest is paid semiannually on June 30 and December 31. 8.33 points Prepare the journal entry to record interest at the effective interest rate at December 31. What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2018, if it uses the direct method? eBook References Complete this question by entering your answers in the tabs below General Cash Paid Journal Prepare the journal entry to record interest at the effective interest rate at December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (I.e., 5,500,000 should be entered as 5.5).) View transaction list Mc Graw Hill ?Prey 5 or 12? Next> ???@) a e ? ^??41)) 4/29/2018 2-30 PM

Explanation / Answer

Bonds par value 1400 million Stated rate of interest 9% market rate of Interest 10% Issue price 1370 million Discount on bonds payable 30 million Interest cash (1400*9%*6/12) 63 million Amortization table: Date Cash Interest Discount Unamortized Carrying Interest Expense Amortized Discount Value of Bonds July1 2018 30 1370 Dec31 2018 63 68.5 5.5 24.5 1375.5 Journal entry: Dec 31 2018 Interest expense Dr. 68.5       Cash Account 63       Discount on Bonds payabale 5.5 Amount shown in Cash flow statement: Cash flows form Financing Activiites: Issue of bonds at discount (1400-30) 1370 million Interest on bonds paid in cash -63 million Net cash provided from Financing activities 1307 million

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