Certainly! Let's tackle the financial accounting problems step by step: **Case 1: Bonds (Electronics, Inc.)** 1. **Cash Raised Upon Issuance of Bonds:** - Electronics, Inc. issued $1.25 million face value bonds with a 5% coupon. - The bonds mature in 10 years and accrue interest semiannually. - The market rate for these bonds is 4%. - To calculate the cash raised upon issuance, we need to find the present value of the bond payments. - Using the formula for present value of an annuity, we get: \[ \text{Cash raised} = \frac{\text{Face value} \times \text{Coupon rate}}{\text{Market rate}} \left(1 - \frac{1}{(1 \text{Market rate})^{(\text{Number of periods})}}\right) \] - Plugging in the values: \[ \text{Cash raised} = \frac{\$1,250,000 \times 0.05}{0.04} \left(1 - \frac{1}{(1 0.04)^{20}}\right) \] The cash raised upon issuance is approximately **$1,250,000**. 2. **Interest Expense in 2022:** - We'll calculate the interest expense for the first year (2022). - Interest expense = Beginning book value × Market rate - Beginning book value = Face value of bonds - Interest expense = \$1,250,000 × 0.04 = \$50,000 3. **Cumulative Interest Recognition Over 10 Years:** - Since the bonds remain outstanding for the entire 10 years, the cumulative interest recognized will be the total interest