Homework Answers
Answer :
1) $ 50,750
2)$ 460
Interest Payable on DEC 31 of Each year = Face Value * annual interest Rate = 725,000*6% = $43,500 (Cash interest)
Bond issed Value = 725,000*0.95 =688,750
Discount on Bonds Payable = 725,000-688,750 =$ 36,250
Annual bond amortization = $36,250 /5 = $7,250
Interest Expenses = Bond Cash interest + Discount amortization = 43,500+7,250 = $50,750 (Answer)
Interest On bank Loan on YEar 2 ( 3months ) = 34,000*4%*3/12 = 340
Net inocme On year 2 = Cash Revenue - Cash interest = 800-340 = $ 460(Answer)
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