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You are the accountant of LTY, Inc., a company dedicated to the sale and manufacture of parts for industrial machinery. LTY closes its books on
You are the accountant of LTY, Inc., a company dedicated to the sale and manufacture of parts for industrial machinery. LTY closes its books on December 31 of each year, uses a perpetual inventory system and the net method of accounting for accounts receivable and payable. You are charged with ensuring that the company's financial statements are published correctly in accordance with US GAAP and on a timely basis, no later than March 30, 2022. Although the closing of the books occurred on December 31, 2021, preparation work and compliance with standards continue to the date of publication
1. On December 1, 2020, LTY issued bonds with a principal (maturity value) of $100,000 and a stated interest of 10% at par value plus accrued interest. The bonds were originally dated November 1, 2020 and are due November 1, 2025 with interest payable on November 1 and May 1. 2. On December 31, 2020, the LTY corporation issued $100,000 in bonds at 12%, for 5 years. The bonds pay interest every six months on July 1 and January 1. The present value of the bonds at the time of issuance was $86,580. In addition, the company incurred $5,000 in bond issuance costs. The effective market rate was 16%.
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