Digital Telephony issued 10% bonds, dated January 1, with a face amount of $32 million on January
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Cash .........................................28,329,472
Discount on bonds ..........................3,670,528
Bonds payable ............................................32,000,000
Digital also leased switching equipment to Midsouth Communications, Inc., on September 30, 2018. Digital purchased the equipment from MDS Corp. at a cost of $6 million. The five-year lease agreement calls for Midsouth to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2018. Digital's implicit interest rate is 12%.
Required:
1. What would be the amount(s) related to the bonds that Digital would report in its statement of cash flows for the year ended December 31, 2018, if Digital uses the direct method? The indirect method?
2. What would be the amounts related to the lease that Midsouth would report in its statement of cash flows for the year ended December 31, 2018?
3. What would be the amounts related to the lease that Digital would report in its statement of cash flows for the year ended December 31, 2018?
4. Assume MDS manufactured the equipment at a cost of $5 million and that Midsouth leased the equipment directly from MDS. What would be the amounts related to the lease that MDS would report in its statement of cash flows for the year ended December 31, 2018?
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Related Book For
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
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