Pluto Corporation has an opportunity to acquire a factory in another part of the country. After...
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Pluto Corporation has an opportunity to acquire a factory in another part of the country. After careful analysis, Pluto has decided to raise the necessary capital for the acquisition by issuing $5,000,000 of 8%, 10-year bonds dated March 1, 2017, with interest payments on March 1 and September 1. Assume the bonds are issued on July 1, 2017 at 94 plus accrued interest at a time when the market rate of interest was 8.9%. Pluto's year end is December 31 and the company uses the effective-interest method to amortize any bond discount or premium. a) Prepare the entry to record the issuance of the bonds on July 1, 2017. b) Prepare the entry on September 1, 2017, to record the interest payment. c) Prepare the entry to record the accrued interest on December 31, 2017. d) Prepare necessary closing entry on December 31, 2017. e) Prepare the March 1, 2018 entry to record the interest payment. Pluto Corporation has an opportunity to acquire a factory in another part of the country. After careful analysis, Pluto has decided to raise the necessary capital for the acquisition by issuing $5,000,000 of 8%, 10-year bonds dated March 1, 2017, with interest payments on March 1 and September 1. Assume the bonds are issued on July 1, 2017 at 94 plus accrued interest at a time when the market rate of interest was 8.9%. Pluto's year end is December 31 and the company uses the effective-interest method to amortize any bond discount or premium. a) Prepare the entry to record the issuance of the bonds on July 1, 2017. b) Prepare the entry on September 1, 2017, to record the interest payment. c) Prepare the entry to record the accrued interest on December 31, 2017. d) Prepare necessary closing entry on December 31, 2017. e) Prepare the March 1, 2018 entry to record the interest payment.
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Answer rating: 100% (QA)
a July 1 2017 Entry to record the issuance of the bonds When the bonds are issued Pluto will receive cash from the investors Since the bonds are issued at a discount 94 the bond discount will be calcu... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
Posted Date:
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