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You have the following information for Brophy, Inc. December 31 Long-Term Debt ($ in millions) Year 2 Year 1 7% debentures, $300 million face value,
You have the following information for Brophy, Inc.
December 31 | ||||||||||||
Long-Term Debt ($ in millions) | Year 2 | Year 1 | ||||||||||
7% debentures, $300 million face value, due Year 11, effective rate $14.6% | $ | 188.6 | $ | 182.7 | ||||||||
Zero coupon bonds, $500 million face value, due Year 8, effective rate 12.0% | 267.9 | 239.2 | ||||||||||
Mortgage debt, $850 million face value, due Year 5, effective rate 8.7%, secured by corporate headquarters | 834.5 | 833.9 | ||||||||||
Various other long-term debt | 12,444.2 | 16,329.2 | ||||||||||
Total long-term debt | $ | 13,735.2 | $ | 17,585.0 | ||||||||
Assume the interest for all the bonds are based on annual basis.
Required:
- 1. How much interest expense did the company record during Year 2 on the 7% debentures? How much of the original issue discount was amortized during Year 2?
- 2. How much interest expense did the company record during Year 2 on the zero coupon bonds?
- 3. Suppose that interest payments on the mortgage are made on December 31 of each year. What journal entry did the company make in Year 2 to recognize interest expense on this debt?
- 4. How much cash interest did the company pay out during Year 2 on the 7% debentures and the zero coupon bonds?
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