Enviro Company issues 8%, 10-year bonds with a par value of $290,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1⁄2. The straight-line method is used to allocate interest expense.

1. What are the issuer's cash proceeds from issuance of these bonds?
2. What total amount of bond interest expense will be recognized over the life of these bonds?
3. What is the amount of bond interest expense recorded on the first interest payment date?

Transcribed Image Text:

On July 5, Poorco sells $60,000 of receivables to Finco without recourse on a notification basis. The financing charge is 6.5%, and there is an 8% holdback for sales discounts and returns. Assume the sales discounts amounted to $700 and sales returns amounted to $1,800. Uncollectible accounts were estimated at $600 but actually were $400. Required A. For Poorco, provide the following journal entries: (7 marks) i. The entry to record the sale of the receivables. ii. The entry to adjust the "Receivable from factor" account for discounts and returns. iii. The entry to record final payment from Finco. B. For Finco, provide the following journal entries: (13 marks) i. The entry to record the purchase of the receivables. ii. The entry to record bad debts expense and write off the uncollectible accounts. iii. The entry to record the customer payments. iv. The entry to record final payment to Poorco. v. The entry to adjust the estimate for bad debts. On July 5, Poorco sells $60,000 of receivables to Finco without recourse on a notification basis. The financing charge is 6.5%, and there is an 8% holdback for sales discounts and returns. Assume the sales discounts amounted to $700 and sales returns amounted to $1,800. Uncollectible accounts were estimated at $600 but actually were $400. Required A. For Poorco, provide the following journal entries: (7 marks) i. The entry to record the sale of the receivables. ii. The entry to adjust the "Receivable from factor" account for discounts and returns. iii. The entry to record final payment from Finco. B. For Finco, provide the following journal entries: (13 marks) i. The entry to record the purchase of the receivables. ii. The entry to record bad debts expense and write off the uncollectible accounts. iii. The entry to record the customer payments. iv. The entry to record final payment to Poorco. v. The entry to adjust the estimate for bad debts.

Answer rating: 100% (QA)

1 Total cash proceeds from issuance of these bonds 290000 87 253750 2 Total interest e... View the full answer