Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please solve Blue Sky State University issued $20,000,000 of its 7% bonds on January 1, 2020. The principal amount is due December 31, 2039 (20
Please solve Blue Sky State University issued $20,000,000 of its 7% bonds on January 1, 2020. The principal amount is due December 31, 2039 (20 years) and the bonds were sold at a net price of $22,293,888 (to yield a market rate of 6%). The first interest payment (cash) is due January 1, 2021 and interest is paid annually thereafter on January 1 (and compounds annually). Which of the following statements is true with respect to the interest expense for the year ending December 31, 2020? PV of Single Sum, 20 periods at 6% .31180 PV of Annuity, 20 periods at 6% 11.46992 The 2020 interest expense will be greater if Blue Sky uses the effective interest method rather than straight- line for recognizing the premium amortization. The 2020 interest expense will be greater if Blue Sky uses the straight-line method rather than the effective interest method for recognizing the premium amortization. Blue Sky will have a larger interest payment on January 1, 2021 if the Company uses the effective interest method rather than the straight-line method for amortization of the premium. None of the possible answers are correct. The interest expense for 2020 will be the same for both methods but the net book value of bonds payable on December 31, 2020 will be higher using straight-line vs. the effective interest method
Please solve
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started