Acc644 Financial Reporting And Analysis Class #3 - Modules 7- 8 Class

Goldey-Beacom CollegeACC644 Financial Reporting and Analysis Class #3 - Modules 7- 8 classModule 7: Current and Long-Term Liabilities 1. On July 1, 2017, Leahy Corporation took out a short-term loan of $45,000 to be repaid inone year. The annual interest rate is 4% with no interest payments due until the loan isrepaid. How much interest should Leahy accrue by year-end December 31, 2017? Howshould it be recorded in the financial statements?Interest expense = $45,000 4% (6/12) = $900The $900 should be recorded as an increase in current liabilities (interest payable)and an increase in expenses (interest expense) on the income statement. 2. Walter Company issues $750,000 of 12% bonds that pay interest semiannually and maturein 10 years. Compute the bonds issue price assuming that the bonds market interest rateis:a. 10% per year compounded semiannually (n = 10 x 2 = 20) (I = 10% / 2 = 5%) Issue price for $750,000, 10-year bonds that pay 10% interest semiannually:Present value of principal payments ($750,000 x 0.37689) 282,667.50Present value of semiannual interest payments ($45,000 x 12.46221) 560,799.45Issue price of bonds PV 843,466.95b. 14% per year compounded semiannually (n = 10 x 2 = 20) (I = 14% / 2 = 7%) Issue