Question

You are the new controller for Moonlight Bay Resorts. The company CFO has asked you to determine the company's interest expense for the year ended December 31, 2021. Your accounting group provided you the following information on the company's debt: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. On July 1, 2021, Moonlight Bay issued bonds with a face amount of $2,100,000. The bonds mature in 20 years and interest of 13% is payable semiannually on June 30 and December 31. The bonds were issued at a price to yield investors 14%. Moonlight Bay records interest at the effective rate. 2. At December 31, 2020, Moonlight Bay had a 10% installment note payable to Third Mercantile Bank with a balance of $650,000. The annual payment is $135,000, payable each June 30. 3. On January 1, 2021, Moonlight Bay leased a building under a finance lease calling for four annual lease payments of $60,000 beginning January 1, 2021. Moonlight Bay's incremental borrowing rate on the date of the lease was 13% and the lessor's implicit rate, which was known by Moonlight Bay, was 12%. Required: Calculate interest expense for the year ended December 31, 2021. (Round your answer to nearest whole dollar. Enter amount as a positive value.) Interest expense

Answer 1

Answer: I bond payable : face value $2,100,000 Npor = doyears xa. . z. 40 years. Coupon rate = 134.12. = 6.504 PMT = face value y couport rate .= $2,100,000 X 6.504 = $13 6,500 plete = 14.1.18 = 7.00.1. Present value os bonds payable = pv (7), 40-136,500,- 3100.000) = $1,960,017 (from finance calcularlos) interest expense = $1,960,017 x (141-12) = $137,301.19 2. wote moyable ? Annual gaymenil (pon) = -1/35,000 badiance. Cpu). = $650,000

Rate = 107, V interest Expense on Jun 30, 2031 = 650,000 X 100** CV). =$32,500 interest Expcakes on Dec 31, 2031 = $ 650,000 -- (135,000 – 32,500 – 33,500) x 10.1.x (12) - $530,000 10.7. * Cila) -$29,000 interest Expensi = $32, 500 +29,000 = $61,500 3. capital lease;. Annual lease pagmont (pince) = $60,000 Npor su Rate = 12-14, Porsent value of annuite due = pv (12.6., 4–60,000,0) = $ 204,109.88 (from financielce). = $ 204,110 (rounded) 30, interest Expense - (204,110 -6,0000)x12:45 = 17293.a jaterest Expense for the year ended Dre 21,2031 - bands payable + Notes paregable + capital ease.

$137,201.19 + $61,500 +17893,2 - $215,994, an interest Expense = $215,994