Preparing and Using an Amortization Table (Straight Line)} Girves Development Corporation has agreed to construct a plant
Question:
Preparing and Using an Amortization Table (Straight Line)}
Girves Development Corporation has agreed to construct a plant in a new industrial park. To finance the construction, the municipal government issued \(\$ 5,000,000\) of 10 -year, \(4.75 \%\) bonds for \(\$ 5,125,000\) on December 31, 2018. Girves will pay the interest and principal on the bonds. When the bonds are repaid, Girves will receive title to the plant. In, the interim, Girves will pay property taxes as if it owned the plant. This financing arrangement is attractive to Girves, as municipal government bonds carry a low interest rate. The bonds are attractive to investors, as both Girves and the municipal government are issuers. The bonds pay interest semiannually on June 30 and December 31.
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1. Prepare an amortization table through December 31, 2020, for these bonds, assuming straight-line amortization.
2. CONCEPTUAL CONNECTION Discuss whether or not Girves should record the plant as an asset after it is constructed.
3. CONCEPTUAL CONNECTION Discuss whether or not Girves should record the liability for these bonds.
\section*{Problem
Step by Step Answer:
Cornerstones Of Financial Accounting
ISBN: 9780176707125
2nd Canadian Edition
Authors: Jay Rich, Jefferson Jones, Maryanne Mowen, Don Hansen, Donald Jones, Ralph Tassone