Connect .> C Secure ! https://newconnect.mheducation.com/flow/connect.html Ch. 2

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Connect .> C Secure ! https://newconnect.mheducation.com/flow/connect.html Ch. 21 - Brief Exercises (60 minutes) Saved Help Save & Exlt Submlt 3 Check my work 6 Brief Exercise 21-6 Bond interest and discount [LO21-4, 21-6] 8.33 points Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,280 million on July 1, 2018, at a price of $1,260 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and 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 indirect method? (List any cash outflows with a minus sign. Enter your answer in millions eBook rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) References $ in millions) Mc Graw Hill ?Prey 6 or 12? Next> 3-59 PM ???@) a e ? ^??41 4/29/2018

Explanation / Answer

Bonds par value 1280 million Stated rate of interest 9% market rate of Interest 10% Issue price 1260 million Discount on bonds payable 20 million Interest cash (1280*9%*6/12) 57.6 Amortization table: Date Cash Interest Discount Unamortized Carrying Interest Expense Amortized Discount Value of Bonds July1 2018 20 1260 Dec31 2018 57.6 63 5.4 14.6 1265.4 Amount shown in Cash flow statement: Cash flows form Financing Activiites: Issue of bonds at discount (1280-20) 1260 million Interest on bonds paid in cash -57.6 million Net cash provided from Financing activities 1202.4 million

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