Question

Question 6 (-12) Lang Corporation issued $600,000 of 8%, 10-year bonds on January 1, 2020, for $560,975. This price provided a yield of 9% on the bonds. Interest is payable semiannually on June 30 and December 31. If Lang uses the effective-interest method, the amount of interest expense to record if financial statements are issued on December 31, 2020 should be: $50,544. (2) $49,448. * $48,685. 4 $48,000.

Answer 1

Answer to Que 6: 1. $ 50,544

Given information is:

Face value - $600,000

Issued value - $560,975

Bond discount - $39,025 (face value - issued value)

Maturity - 10 years, Bond interest rate - 8%, market interest rate - 9%

Interest paid semi-annually

	B	C	D	E	F	G
	Interest payment	Interest exp	Amortization	Bond Discount	Bonds payable	Book value
Calculations	8%*Face value	9%*Prev Book value	C-B	Prev BD - D	Face value	F-E
Jan-01				39,025.00	600,000.00	560,975.00
Jun-30	24,000.00	25,243.88	1,243.88	37,781.13	600,000.00	562,218.88
Dec-31	24,000.00	25,299.85	1,299.85	36,481.28	600,000.00	563,518.72
		50,543.72

Answer to question 7: 3. 2020 net income $10,000; 2021 net income: $30,000

Date	Account Titles and Explanation	Debit Amount	Credit Amount
Dec-31	Available-for-sale securities	10,000
	Gain on Available-for-sale securities		10,000
	(To record the increase in the value of securities)
Jan-03	Available-for-sale securities	30,000
	Gain on Available-for-sale securities	10,000
	Gain on Available-for-sale securities		40,000
	(To record the increase in the value of securities)

Answer to Question 8 : 1. $1,104,649

Given information is as follows:

Face value (F)	$1,000,000
Discount rate (r)	5%
Maturity period	15
No. of periods (n)	30
Coupon rate	6%
Coupon amount (C)	$ 30,000

Calculation of Coupon amount = Face value * Coupon rate / 2 = $30,000

Formula to calculate the issue price of bond is as follows.

F 1-(1+r) - Issueprice = C* - + (1 + r)"

Answer to Question 9: 4. $ 563,519

Given information is:

Face value - $600,000

Issued value - $560,975

Bond discount - $39,025 (face value - issued value)

Maturity - 10 years, Bond interest rate - 8%, market interest rate - 9%

Interest paid semi-annually

	B	C	D	E	F	G
	Interest received	Interest @ BV	Amortization	Bond Discount	Bonds receivable	Book value
Calculations	8%*Face value	9%*Prev Book value	C-B	Prev BD - D	Face value	F-E
Jan-01				39,025.00	600,000.00	560,975.00
Jun-30	24,000.00	25,243.88	1,243.88	37,781.13	600,000.00	562,218.88
Dec-31	24,000.00	25,299.85	1,299.85	36,481.28	600,000.00	563,518.72

**Please note: Only 4 sub-questions be answered, please submit the question again for the answer of 5th sub-question.**